Bloomberg News

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

February 01, 2012

Feb. 2 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds against non-payment fell, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 3 basis points to 174.5 as of 8:29 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure is set for its lowest close since Oct. 28, according to data provider CMA.

The Markit iTraxx Japan index fell 3 basis points to 154.5 as of 9:34 a.m. in Tokyo, Citigroup Inc. prices show. The index is on track 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 fell 4 basis points to 151 as of 12:09 p.m in Sydney, 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.

--Henry Sanderson, with assistance from Sarah McDonald in Sydney. 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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