Bloomberg News

Australia Bond Risk Rises, Credit-Default Swap Prices Show

February 27, 2012

The cost of insuring Australia corporate bonds from non-payment rose, according to traders of credit-default swaps.

The Markit iTraxx Australia index rose 1 basis point to 144 basis points as of 11:18 a.m. in Sydney, according to Westpac Banking Corp. (WBC) That would be the highest level since Feb. 23, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index was unchanged at 142 basis points as of 9:17 a.m. in Tokyo, according to Deutsche Bank AG prices. Japan’s contracts fell to its lowest level since Aug. 18 last week, according to CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was unchanged at 164 basis points as of 8:26 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc prices.

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.

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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