Bloomberg News

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

January 02, 2012

Jan. 3 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment dropped, according to credit-default swap traders.

The Markit iTraxx Australia index fell 3 basis points to 178 basis points as of 11:31 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge is set for the largest daily decline since Dec. 21 and the lowest level since Nov. 8, when it touched 177.75 basis points, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan declined 3 basis points to 203.5 basis points as of 8:31 a.m. in Hong Kong, Royal Bank of Scotland Group Plc. prices show. The index is headed for the biggest drop since Dec. 21, and the lowest level since Dec. 9., when it touched 200.17 basis points, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

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: Andrew Monahan

To contact the reporter on this story: Wendy Mock in Hong Kong at wmock3@bloomberg.net

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


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