Japan’s Bond Risk Falls to Five-Month Low, Default Swaps Show
February 06, 2012, 8:27 PM ESTBy Tanya Angerer
Feb. 7 (Bloomberg) -- The cost of protecting Japanese corporate bonds from default dropped to its lowest in five months, according to traders of credit-default swaps.
The Markit iTraxx Japan index declined four basis points to 151 as of 8:59 a.m. in Tokyo, Deutsche Bank AG prices show. The index is headed for its lowest close since Sept. 8, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was unchanged at 164 as of 8:10 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.
The Markit iTraxx Australia index was unchanged at 144 basis points as of 11:00 a.m. in Sydney, according to Westpac Banking Corp. The measure has declined for five days, according to CMA.
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: Andrew Monahan
To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net
To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net
