Bloomberg News

Asian Bond Risk Rises, Credit-Default Swap Prices Show

January 08, 2012

Jan. 9 (Bloomberg) -- The cost of protecting corporate and sovereign bonds in Asia from default rose from last week’s closing prices, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose two basis points to 208.5 basis points as of 8:34 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is set for its highest close since Dec. 21, according to data provider CMA.

The Markit iTraxx Australia index was little changed at 181 basis points as of 11:21 a.m. in Sydney, according to Westpac Banking Corp. The measure ranged between 100 and 239 basis points in 2011, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The market in Japan is closed today for a public holiday.

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: Tanya Angerer in Singapore at tangerer@bloomberg.net

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


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