Bloomberg News

Bond Risk in Asia, Japan Falls, Credit-Default Swap Prices Show

January 26, 2012

Jan. 27 (Bloomberg) -- The cost of protecting bonds in Asia and Japan against non-payment dropped, according to credit- default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 1 basis point to 180.5 as of 8:13 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.

The Markit iTraxx Japan index declined 1 basis point to 160 as of 9:11 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is set for its lowest close since Sept. 16, 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 is traded at 155 basis points as of 11:09 a.m. in Sydney, according to Westpac Banking Corp. That’s up by 2.1 basis points from 152.9 yesterday, according to CMA prices in New York. Australian market was closed yesterday due to a 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: Pavel Alpeyev

-0- Jan/27/2012 00:46 GMT

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 -0- Jan/27/2012 00:30 GMT


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