Bloomberg News

Australia Bond Risk Falls to Seven-Month Low, Credit Swaps Show

March 15, 2012

The cost of insuring corporate and sovereign bonds against non-payment in Australia fell to the lowest in more than seven months, according to credit-default swap traders and data provider CMA.

The Markit iTraxx Australia index dropped 2 basis points to 133 basis points as of 11:50 a.m. in Sydney, Barclays Plc prices show. The measure is set to close at its lowest level since Aug. 4, 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 fell 1 basis point to 141 as of 9:31 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is on track for its lowest close since March 14, CMA prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 139 basis points as of 8:50 a.m. in Singapore, Barclays 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.

To contact the reporter on this story: Benjamin Garvey in Hong Kong at bgarvey8@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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