Bloomberg News

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

October 27, 2011

Oct. 28 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment declined, according to credit-default swap traders.

The Markit iTraxx Japan index dropped 18 basis points to 157 basis points as of 9:18 a.m. in Tokyo, Deutsche Bank AG prices show. That’s on course for its biggest daily decline since May 26, 2010, and its lowest close since Sept. 16, according to CMA, which is owned by CME Group Inc., and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 18 basis points to 168.5 as of 8:34 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark is headed for the lowest level since Sept. 16, CMA prices in New York show.

The Markit iTraxx Australia index fell 15 basis points to 154.5 as of 11:26 a.m. in Sydney, according to Westpac Banking Corp. That’s headed for its lowest close since Aug. 18, 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. A basis point is 0.01 percentage point.

To contact the reporter on this story: 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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