HONG KONG -- The cost of protection against Thailand's debt rose amid fears about political instability, while Asian bond spreads were flat Wednesday amid continued caution about global economic growth and the financial sector.

Thailand's five-year credit default swaps (CDS), or insurance-like contracts that offer protection against defaults or restructuring, widened by about 4 basis points (bps) to 132.

Protesters remained camped outside the office of Thailand's prime minister on Wednesday demanding his ouster from power. The country's central bank also meets on Wednesday raising investor concerns. A Reuters poll shows eight out of 12 economists expect an increase in interest rates.

"With such political issues remaining in place and the potential of the economy suffering as a result, we maintain our view that the Thai sovereign CDS should underperform against other HG (high-grade) sovereigns in the region," said Lehman Brothers analysts in a note to clients on Wednesday.

Thailand's protests are the latest concern over political instability in Asia. Pakistan is facing a rupture in the ruling coalition, while Malaysian opposition leader Anwar Ibrahim won election to parliament this week and is expected to bid for power.

Inflation worries resurfaced after oil prices rose for a third consecutive session to near $117 a barrel as tropical storm Gustav headed towards the Gulf of Mexico.

The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, remained range-bound at around 560 compared to Asian trade on Tuesday, after widening overnight to as much as 570, according to a Hong Kong-based trader.

The equivalent investment-grade index was quoted at 161, slightly wider than Tuesday.

Investors said spreads are unlikely to tighten in the near-term, especially amid expectations for a deluge in new issuance from the region in September.

Korea Railroad sold $200 million in additional 2013 bonds on Tuesday in New York hours, pricing the offering at a yield of 5.9 percent, compared to the yield of 5.5 percent it had paid in May with its initial $300-million offering.

The pricing was equivalent to 284.76 basis points over equivalent Treasuries, with KORAIL's bonds tightening to about 280 bps in the secondary market on Wednesday.