Bloomberg News

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

February 14, 2012

Feb. 15 (Bloomberg) -- The cost of insuring Asia’s corporate and sovereign bonds from default increased, according to traders of credit-default swaps.

The Markit iTraxx Japan index rose 4 basis points to 151 as of 9:02 a.m. in Tokyo, Deutsche Bank AG prices show. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 0.5 basis points to 164.5 as of 8.38 a.m. from yesterday’s close in Hong Kong, according to Royal Bank of Scotland Group Plc prices.

The Markit iTraxx Australia index was unchanged to 145 basis points as of 11.24 a.m. 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.

--Editor: Beth Thomas

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


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