Bloomberg News

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

May 28, 2012

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

The Markit iTraxx Australia index climbed 2.5 basis points to 196 basis points as of 10:23 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The benchmark has traded this month between 154.5 and a five-and-a-half month high of 201 basis points on May 18, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside of Japan advanced 2 basis points to 196.5 as of 8:23 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is poised to rise 31.6 basis points from April 30, according to CMA.

The Markit iTraxx Japan index decreased 2 basis points to 186 basis points as of 9:33 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge reached 217.3 on May 18, the highest since Oct. 5, CMA prices 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 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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