Bank bond prices slumped Tuesday amid the global tumult in financial markets set off by fresh fears about Japan's economy.

Bank bond spreads-the difference between their yields and those of Treasuries-widened as much as 5 basis points as jittery investors sold bonds.

"At this point, Asia is not getting better, it is getting worse. And there are definitely implications for the U.S. economy down the road," said bank bond analyst Thomas Flynn at Morgan Stanley Inc.

"Bank spreads in general were as wide today as they were in 1994 and in some cases wider," said Joseph J. Labriola of PaineWebber Inc. Four years ago, the Federal Reserve doubled short-term interest rates to head off inflation. As a result, he said, bank bond prices fell to record lows.

Analysts stressed that investors were nervous, but not panicked.

"Bank bonds are not getting punished more than industrial bonds," said bank bond analyst Allerton G. Smith of Donaldson, Lufkin & Jenrette Inc. "In this type of environment, with the (Dow Jones industrial average) down by 200 points and further concern about corporate profits and economic vitality," bank bond spreads are bound to widen some.

Strong fundamentals-and the relatively small supply of bank bonds - are preventing spreads from widening further. "If there was as much bank paper in the market as industrial paper, bank bond spreads would have fared far worse than industrials," said Mr. Labriola.

Still, there are doubts that bank bond spreads will recover soon. A relatively flat yield curve and worsening problems in Asia may keep bank bond investors on the sidelines.

"Spreads may snap back a basis point or two," said Mr. Labriola. "But in the next month spreads could be wider than they are today."

Mr. Flynn of Morgan said he also doubts a rebound soon. That "depends on evidence of an improving Japan, whether the equity and currency markets will settle down, and if the bear market in U.S. stocks is temporary," he said. "Frankly I don't see that."

Of course, cheaper prices attract bargain hunters. Tightening spreads near the end of the day suggested some investors were probably upgrading their portfolios with higher-quality names.

Mr. Smith and Mr. Labriola favor regional banks, which Mr. Smith noted "have little exposure to Asia and are still going to be the beneficiaries of consolidation."

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