Bloomberg News

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

June 26, 2012

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

The Markit iTraxx Japan index decreased 1.5 basis points to 186.5 basis points as of 9:10 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark had risen 34.4 basis points this quarter through yesterday, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 186 basis points as of 8:08 a.m. in Singapore, according to Royal Bank of Scotland Group Plc prices. The index has traded in a 153.5 to 210 basis-point range since the end of March, CMA data show.

The Markit iTraxx Australia index was little changed at 191 as of 10:08 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The gauge had increased for four trading days through yesterday and was up 43.2 basis points this quarter, according to CMA.

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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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


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