Bloomberg News

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

June 05, 2012

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

The Markit iTraxx Australia index dropped 2 basis points to 204 basis points as of 11:04 a.m. in Sydney, according to Credit Agricole SA. (ACA) The gauge is set for its lowest close since May 31, CMA prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside of Japan declined 3 basis points to 202 as of 8:04 a.m. in Hong Kong, also on course for the lowest close since May 31, according to Credit Agricole and CMA prices.

The Markit iTraxx Japan index fell 3 basis points to 199 basis points as of 9:12 a.m. in Tokyo, Citigroup Inc. prices show. The index is down from 217.3 on May 18, which was its highest since October, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

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: Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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