Bloomberg News

Asia Bond Risk Rises to 6-Month High, Credit-Default Swaps Show

June 15, 2011

June 16 (Bloomberg) -- The cost of insuring corporate and sovereign bonds in Asia against non-payment rose to the highest in more than six months, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 2.5 basis points to 117.5 as of 8:31 a.m. in Beijing, according to Royal Bank of Scotland Group Plc prices. The index is on course for its highest level since Nov. 30, according to data from CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers.

The Markit iTraxx Australia index rose 4 basis points to 118.5 as of 10:40 a.m. in Sydney, Australia & New Zealand Banking Group Ltd. prices show. That’s on course for its highest level since Sept. 28, CMA prices show.

The Markit iTraxx Japan index rose 3.5 basis points to 132.5 as of 9:34 a.m. in Tokyo, Deutsche Bank AG prices show.

Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A basis point is 0.01 percentage point.

--Henry Sanderson. Editor: Ed Johnson

To contact Bloomberg News staff on this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net.


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