Bloomberg News

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

January 29, 2012

Jan. 30 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds against non-payment rose, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 2 basis points to 183.5 as of 9:05 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure is set for its second straight daily increase, up from a three-month low of 180.4 marked on Jan. 26, according to data provider CMA.

The Markit iTraxx Japan index rose 1 basis point to 162.5 as of 9:54 a.m. in Tokyo, Citigroup Inc. prices show. The gauge fell 12.9 basis points last week, 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 unchanged at 156 basis points as of 12:05 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.

--Henry Sanderson. Editor: Andrew Monahan

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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


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