Bloomberg News

Bond Risk Climbs in Asia ex-Japan, Credit-Default Swaps Show

April 19, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 1.5 basis points to 167.5 basis points as of 8:30 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge is on course for its highest close since April 10, according to data provider CMA.

The Markit iTraxx Australia index gained 4 basis points to 159 as of 10:09 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The measure is poised for the biggest weekly gain since the week ending March 23 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 was little changed at 170 basis points as of 9:19 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark has traded between 194.6 basis points and 136.2 basis points this year, CMA prices show.

Credit-default swap indexes are benchmarks for insuring 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: Taejin Park in Seoul at tpark31@bloomberg.net

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


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