Bloomberg News

Australia, Japan Bond Risk Rises, Credit-Default Swaps Show

April 09, 2012

The cost of insuring Australian and Japanese corporate bonds from default increased, according to traders of credit-default swaps.

The Markit iTraxx Australia index rose 9 basis points to 158 as of 10 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The benchmark is set for its highest close since Jan. 30, 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 half a basis point to 163.5 as of 9 a.m. in Tokyo, according to Deutsche Bank AG. The guage is also poised for its highest close since Jan. 30, according to CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was at 165.5 basis points as of 8:01 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure has traded between 132.5 and 209 this year, CMA 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: 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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