Bloomberg News

Australian Bond Risk Increases, Credit-Default Swap Prices Show

February 09, 2012

Feb. 10 (Bloomberg) -- The cost of insuring bonds in Australia against non-payment rose, according to credit-default swap traders.

The Markit iTraxx Australia index climbed 3 basis points to 141.5 basis points as of 11:23 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is on course for its biggest daily increase since Jan. 30, according to 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 changed little at 159 basis points as of 8:23 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The Markit iTraxx Japan index was changed little at 140 basis points as of 9:32 a.m. in Tokyo, Citigroup Inc. 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: Beth Thomas

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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