Bloomberg News

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

May 01, 2012

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

The Markit iTraxx Australia index slid 3.5 basis points to 153 basis points as of 10:23 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The gauge is set for its lowest close since April 6, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 2 basis points to 163 from April 30’s close as of 8:20 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The index is headed for its lowest close since April 17, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Hong Kong and Singapore were closed yesterday for a public holiday.

The Markit iTraxx Japan index fell 2.5 basis points to 181 as of 9:35 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is poised for its first decline since April 19, CMA data 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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