Bloomberg News

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

May 02, 2012

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

The Markit iTraxx Australia index rose 3.5 basis points to 157 as of 10:30 a.m in Sydney, according to Westpac Banking Corp. (WBC) The gauge climbed 7.4 basis points in April for its second straight monthly advance, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 2 basis points to 165 as of 8:50 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The index rose 5.3 basis points last month, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Japan was closed for a public holiday. The Markit iTraxx Japan index fell 5.9 basis points this year to 180.9 as of May 2, 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 Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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


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