Bloomberg News

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

May 22, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 5.5 basis points to 198 basis points as of 8:32 a.m. in Hong Kong, Credit Agricole SA prices show. The index reached a four-month high of 200.3 on May 18, according to data provider CMA.

The Markit iTraxx Japan index increased 2 basis points to 209 as of 9:45 a.m. in Tokyo, according to Citigroup Inc. The benchmark dropped 7.9 basis points yesterday, the biggest one- day decrease since March 27, 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 rose 3 basis points to 197 basis points as of 10:32 a.m. in Sydney, Credit Agricole prices show. The gauge reached 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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