Bloomberg News

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

June 28, 2012

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

The Markit iTraxx Australia index increased 2.5 basis points to 192 as of 10:28 a.m. in Sydney, Credit Agricole SA (ACA) prices show. The gauge is on course for its highest close since June 14, and has risen 44 basis points since April through yesterday, according to CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 183 as of 8:28 a.m. in Singapore, Credit Agricole prices show. The index, which fell for three straight days through yesterday, traded in a 153.5 to 210 basis-point range since the end of March, according to data provider CMA.

The Markit iTraxx Japan index was little changed at 186 basis points as of 9:18 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark has fallen from a seven-month high of 217 basis points on May 18, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

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 22 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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