Bloomberg News

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

June 14, 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 4 basis points to 183 basis points as of 8:28 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge is headed for the biggest weekly drop since the week ended March 16, according to data provider CMA.

The Markit iTraxx Australia index fell 5 basis points to 188 as of 10:15 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The benchmark is poised to close at the lowest level since May 15, 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 decreased 2.5 basis points to 173 basis points as of 9:22 a.m. in Tokyo, Deutsche Bank AG. prices show. The index is set to close at the lowest level since April 20, 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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