Bloomberg News

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

January 16, 2012

Jan. 17 (Bloomberg) -- The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment fell, according to credit-default swap traders.

The Markit iTraxx Australia index declined 5 basis points to 175 as of 11:52 a.m. in Sydney, Royal Bank of Scotland Group Plc prices show. The gauge is on track for its lowest level since Jan. 13, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 3 basis points to 202.5 as of 8:52 a.m. in Singapore, RBS prices show. The measure is set for the lowest level since Jan. 13, 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 decreased 1 basis point to 188.5 as of 9:48 a.m. in Tokyo, Deutsche Bank AG 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: Shelley Smith

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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