Bloomberg News

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

April 03, 2012

The cost of insuring corporate and sovereign bonds from non-payment advanced in Asia, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 154.5 basis points as of 8:05 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure is set for its first increase in three days, 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 climbed 1 basis point to 153.5 as of 9:04 a.m. in Tokyo, Deutsche Bank AG prices show. This would be the first increase since March 29.

The Markit iTraxx Australia index was little changed at 144.5 basis points as of 10:14 a.m. in Sydney, according to prices from Westpac Banking Corp. (WBC)

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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