Bloomberg News

Bond Risk Increases in Japan, Credit-Default Swap Prices Show

January 09, 2012

Jan. 10 (Bloomberg) -- The cost of insuring corporate and sovereign bonds from non-payment increased in Japan, according to traders of credit-default swaps.

The Markit iTraxx Japan index advanced 1 basis point to 196 basis points as of 9.15 a.m. in Tokyo, according to Deutsche Bank AG. The gauge is on track for its highest close since Dec. 1, according to data provider CMA.

The Markit iTraxx Australia index fell 0.5 basis points to 183.25 as of 11:15 a.m. in Sydney, Westpac Banking Corp. prices show. At those levels the index has risen 2.75 basis points this year, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 209 basis points as of 8:47 a.m. in Hong Kong, 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: Katrina Nicholas

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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