Bloomberg News

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

October 10, 2011

Oct. 11 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment fell, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 14 basis points to 211.5 basis points as of 8:40 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. That’s on track for the lowest level since Sept. 21, according to data provider CMA.

The Markit iTraxx Australia index fell 12 basis points to 197 as of 11:18 a.m. in Sydney, Westpac Banking Corp. prices show. A close of 197 would be the lowest since Sept. 21, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index fell 10 basis points to 202.5 as of 9:20 a.m. in Tokyo, Citigroup Inc. prices show. That’s on track for its lowest close since Sept. 30, CMA 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.

--Editor: Edward Johnson

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

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


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