Bloomberg News

Australian Bond Risk Falls to Three-Week Low, Default Swaps Show

February 28, 2012

The cost of insuring Asia-Pacific sovereign and corporate bonds from non-payment fell, with Australia’s contracts declining to a three-week low, according to traders of credit-default swaps.

The Markit iTraxx Australia index dropped 2 basis points to 140 basis points as of 11:12 a.m. in Sydney, according to Westpac Banking Corp. (WBC) That would be the lowest level since Feb. 8, according to CMA.

The Markit iTraxx Japan index decreased 3 basis points to 139 basis points as of 9:10 a.m. in Tokyo, according to Deutsche Bank AG prices. Japan’s contracts fell to 137 on Feb. 24, the lowest since Aug. 18, 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 fell 1 basis point to 161 basis points as of 8:27 a.m. in Hong Kong, according to Credit Agricole SA (ACA) 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

To contact the editor responsible for this story: Shelley Smith at

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