Bloomberg News

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

November 02, 2011

Nov. 3 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds from default increased, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed five basis points to 203.5 basis points as of 8:22 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is headed for its highest close since Oct. 21, after closing down 0.3 basis points yesterday, according to data provider CMA.

The Markit iTraxx Australia index rose two basis points to 186 basis points as of 11:12 a.m. in Sydney, according to Westpac Banking Corp. The gauge is set for its highest close since Oct. 20, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Markets in Japan are closed for a public holiday. The Markit iTraxx Japan index closed up 5.1 basis points at 179.8 yesterday, 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.

--Editor: Edward Johnson

To contact the reporter on this story: Rachel Evans in Hong Kong at

To contact the editor responsible for this story: Shelley Smith at

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