Bloomberg News

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

October 20, 2011

Oct. 21 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds from default fell, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 1 basis point to 207 basis points as of 8:41 a.m. in Beijing, Royal Bank of Scotland Group Plc prices show.

The Markit iTraxx Australia index dropped 4 basis points to 186 basis points as of 10:38 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd.

The Markit iTraxx Japan index was unchanged at 192 basis points as of 9:35 a.m. in Tokyo, Citigroup Inc. 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: Edward 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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