Bloomberg News

Bond Risk Increases in Asia, Credit-Default Swap Prices Show

May 29, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 1 basis point to 193 basis points as of 8:27 a.m. in Hong Kong, according to Credit Agricole SA. (ACA) The gauge is set for an increase of 28 basis points since April 30, the biggest monthly gain since September, according to data provider CMA.

The Markit iTraxx Japan index climbed 2 basis points to 189 as of 9:38 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark reached 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 was little changed at 192 basis points as of 10:27 a.m. in Sydney, Credit Agricole prices show. The measure is on track to rise 37 basis points this month, its biggest same-period rise since September.

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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