Bloomberg News

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

October 13, 2011

Oct. 14 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment increased, according to credit-default swap traders.

The Markit iTraxx Australia index rose by 5 basis points to 198 basis points as of 8:47 a.m. in Hong Kong, according to Credit Agricole SA prices. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 4 basis points to 214 basis points as of 11:47 a.m. in Sydney, Credit Agricole prices show. Both indexes are headed for the biggest daily advance since Oct. 4, according to data provider CMA.

The Markit iTraxx Japan index increased 5 basis points to 199 basis points as of 9:46 a.m. in Tokyo, Deutsche Bank AG prices show. The increase would be the largest since Oct. 5, CMA data 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: Beth Thomas

To contact the reporters on this story: Wendy Mock in Hong Kong at wmock3@bloomberg.net; 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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