Bloomberg News

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

May 21, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 4 basis points to 195 basis points as of 8:38 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is on track to decline for a second day from a four-month high of 200.3 on May 18, according to data provider CMA.

The Markit iTraxx Japan index dropped 7 basis points to 208 as of 9:33 a.m. in Tokyo, according to Deutsche Bank AG prices. The benchmark is poised for its biggest daily decline since March 27 after reaching 217.3 basis points on May 18, the highest since Oct. 5, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index slid 5 basis points to 194.5 basis points as of 10:39 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The gauge rose to 201 basis points on May 18, its highest since Nov. 29, according to CMA.

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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