Bloomberg News

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

October 11, 2011

Oct. 12 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment increased, according to credit-default swap traders.

The Markit iTraxx Japan index jumped 10 basis points to 204.5 basis points as of 9:25 a.m. in Tokyo, Citigroup Inc. prices show. A close of 204.5 would be the highest since Oct. 7, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 3 basis points to 223 as of 8:40 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The Markit iTraxx Australia index increased 2 basis points to 204 as of 11:25 a.m. in Sydney, Westpac Banking Corp. 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: Shelley Smith

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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