Inflation worries keep investors on edge

HONG KONG (Reuters) - Asian sovereign and corporate bond spreads were rangebound on Monday amid caution ahead of a heavy load of global economic indicators, including the widely anticipated U.S. employment data at the end of the week.

Inflation worries also continued to keep investors on edge.

Cash bonds from Vedanta Resources were in focus as it is expected to sell debt to finance its $2.6 billion (1.3 billion pound) bid for the assets of bankrupt copper miner Asarco.

But Vedanta's bonds were flat after its unit, Sterlite Industries, agreed on Saturday to buy the operating assets of the Arizona-based miner.

Analysts noted Sterlite may be unable to complete the acquisition given the opposition of copper miner Grupo Mexico, which owns Asarco but does not have board control.

Vedanta's 6.625 percent cash bonds maturing in 2010 were traded at 100/102 to the dollar, virtually unchanged from Friday, though its spread over similar Treasuries moved out by 3 basis points (bps) to 276.

"The expectations are that Vedanta is going to find it hard to make this acquisition given Grupo Mexico is going to do whatever it can to block it. We are still at the very early stages of this," said a Singapore-based analyst at a major foreign bank who declined to be identified.

Overall trading volumes in Asian bonds were light ahead of economic data, including key U.S. manufacturing data due out later in the day that could give clues about the extent of a U.S. economic slowdown.

The iTRAXX Asia ex-Japan high-yield index a key measure of risk aversion, was quoted at 470 basis points (bps), rangebound from Friday's levels.