Bloomberg News

Asia-Pacific Bond Risk Falls, Credit-Default Swap Prices Show

March 26, 2012

The cost of insuring Asia-Pacific corporate and sovereign bonds against default dropped, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan declined 5.5 basis points to 147.5 basis points as of 8:34 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The index is headed for its lowest close since the new series started trading on March 20, according to data provider CMA.

The Markit iTraxx Australia index slid 3.5 basis points to 139.3 basis points as of 11:32 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The gauge is 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 Japan index fell 0.5 basis points to 153.5 as of 9:42 a.m. in Tokyo, Citigroup Inc. 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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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


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