Bloomberg News

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

June 12, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan declined 2 basis points to 190 basis points as of 8:40 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is poised for its lowest close since May 15, according to data provider CMA.

The Markit iTraxx Australia index fell 3 basis points to 193.5 as of 10:34 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The benchmark has ranged between 192 and 211 basis points this month, according to CMA, which is owned by CME Group Inc. and compiled prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index dropped 2 basis points to 183 basis points as of 9:33 a.m. in Tokyo, Citigroup Inc. prices show. That’s on track for its lowest close since June 11, CMA prices show.

Credit-default swap indexes are benchmarks for insuring 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: Taejin Park in Seoul at tpark31@bloomberg.net

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


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