Bloomberg News

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

May 14, 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 climbed 6.5 basis points to 188.5 basis points as of 10:02 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The gauge is set for its highest close since Dec. 20, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 4 basis points to 190 as of 8:06 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is poised to close at the highest level since Jan. 20, CMA data show.

The Markit iTraxx Japan index increased 3 basis points to 211 as of 9:16 a.m. in Tokyo, according to Deutsche Bank AG prices. The benchmark matched its highest level reached on Nov. 25, according to CMA prices.

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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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


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