Bloomberg News

Bond Risk in Asia Decreases, Credit-Default Swap Prices Show

March 25, 2012

The cost of insuring Japanese and other Asian corporate and sovereign bonds from default dropped, according to traders of credit-default swaps.

The Markit iTraxx Japan index fell 2 basis points to 159 basis points as of 10 a.m. in Tokyo, Citigroup Inc. prices show. The index is poised for its lowest close since March 21, when the new Series 17 started trading, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 1 basis point to 151.5 as of 9:06 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is also set for its lowest close since March 21, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index declined 0.5 basis point to 142 as of 12:06 p.m. in Sydney, RBS 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.

To contact the reporter on this story: Wendy Mock in Hong Kong at wmock3@bloomberg.net

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


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