Bloomberg News

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

June 27, 2012

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

The Markit iTraxx Japan index fell 2.5 basis points to 182 as of 9:40 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is headed for its lowest close since June 20, and has fallen from a seven-month high of 217 basis points May 18, 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 declined 2 basis points to 181.5 as of 8:11 a.m. in Singapore, according to Royal Bank of Scotland Group Plc prices. The index is set for its lowest close since June 22, after trading in a 153.5 to 210 basis-point range since the end of March, according to data provider CMA.

The Markit iTraxx Australia index decreased 2 basis points to 190 as of 10:09 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The gauge has risen 42 basis points since April through yesterday, according to CMA.

All three indexes are headed for their first three-month increase since the quarter ended September, the data show. Contracts on Japanese companies increased 31 and the Asia index climbed 24 in the period, according to CMA data.

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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