Bloomberg News

Bond Risk in Australia Falls, Credit-Default Swap Prices Show

June 20, 2012

The cost of insuring Australian corporate bonds from default declined, according to traders of credit-default swaps.

The Markit iTraxx Australia index fell 1 basis point to 181 basis points as of 10:47 a.m. in Sydney, according to Westpac Banking Corp. The gauge is set for its lowest close since May 11, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 174.5 basis points as of 8:31 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index has fallen 24 basis points this month, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index was also little changed at 177 basis points as of 9:49 a.m. in Tokyo, Citigroup Inc. 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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