Bloomberg News

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

November 13, 2011

Nov. 14 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds from default fell, according to traders of credit-default swaps.

The Markit iTraxx Australia index tumbled 11 basis points to 176 basis points as of 11:13 a.m. in Sydney, according to Deutsche Bank AG. That’s on course for the biggest daily drop since Oct. 27 and the lowest close since Nov. 4, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 11 basis points to 190.5 basis points as of 8:58 a.m. in Hong Kong, Deutsche Bank prices show. The gauge is set for the lowest close since Nov. 3, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index fell 8 basis points to 176 as of 9:15 a.m. in Tokyo, Deutsche Bank 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: 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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