Bloomberg News

Corporate, Sovereign Bond Risk in Asia Falls, Default Swaps Show

January 24, 2012

Jan. 25 (Bloomberg) -- The cost of protecting Asian corporate and sovereign bonds against non-payment dropped, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 3 basis points to 191 as of 8:25 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.

The Markit iTraxx Japan index rose 2 basis points to 171 as of 9:30 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is set for its first increase since Jan. 18, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index was little changed at 160 basis points as of 11:34 a.m. in Sydney, Westpac Banking Corp. 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: Pavel Alpeyev

To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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


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