Bloomberg News

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

October 26, 2011

Oct. 27 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds from default dropped, according to traders of credit-default swaps.

The Markit iTraxx Australia index fell five basis points to 180 as of 11:19 a.m. in Sydney, according to Credit Agricole SA. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped two basis points to 201, Credit Agricole prices show.

The Markit iTraxx Japan index decreased two basis points to 191 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: Garfield Reynolds

To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

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


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