Bloomberg News

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

May 27, 2012

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

The Markit iTraxx Japan index slid 3 basis points to 195 basis points as of 9:28 a.m. in Tokyo, according to Citigroup Inc. The gauge is set for its lowest close since May 7, falling from a seven-month high of 217.3 on May 18, according to data provider CMA. The index is headed for a third monthly increase, rising from 182.4 at the end of April, CMA prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 2 basis points to 197 basis points as of 8:17 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The index is headed for its lowest close since May 22, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. It is up from 164.9 at the end of last month, the data show.

The Markit iTraxx Australia index fell 1 basis point to 198 as of 10:17 a.m. in Sydney, Credit Agricole prices show. The benchmark has traded between 154.5 and 201 basis points this month, 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 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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