Bloomberg News

Asia-Pacific Bond Risk Falls, Credit-Default Swap Prices Show

October 04, 2011

Oct. 5 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment declined, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 4 basis points to 274 as of 8:28 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. That’s set for the first drop since Sept. 27, according to CMA, which is owned by CME Group Inc., and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index fell 1 basis point to 239 as of 11:36 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is headed for its first decline since Sept. 27, CMA prices in New York show. The Markit iTraxx Japan index slid 1 basis point to 220 basis points as of 9:30 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.

--Editor: Beth Thomas

To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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


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