Bloomberg News

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

November 24, 2011

Nov. 25 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment rose, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 7 basis points to 236 basis points as of 8:38 a.m. in Singapore, according to Royal Bank of Scotland Group Plc, prices. That’s set for the highest close since Oct. 6, according to data provider CMA.

The Markit iTraxx Australia index advanced 6 basis points to 227 as of 8:38 a.m. in Singapore, RBS prices show. That’s headed for the highest level since Oct. 4, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The index rose 2 basis points to 209 as of 9:35 a.m. in Tokyo, according to Deutsche Bank AG prices. The gauge is set for the highest close since Oct. 7, according to CMA.

Credit-default swap indexes are benchmarks for insuring 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: Pavel Alpeyev

To contact the reporter on this story: Benjamin Garvey in Hong Kong at bgarvey8@bloomberg.net

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


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