Bloomberg News

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

April 01, 2012

The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment fell, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 4 basis points to 156 basis points as of 8:33 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge declined 47 basis points in the first three months of the year, the biggest quarterly drop since the period ended September 2009, according to data provider CMA.

The Markit iTraxx Japan index retreated 3 basis points to 152 basis points as of 9:35 a.m. in Tokyo, Deutsche Bank AG prices show. The measure dropped 33 basis points last quarter, 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 decreased 2.5 basis points to 144.5 at 11:26 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The gauge ended the quarter down 33 basis points, CMA data show, the second three-month decline.

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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