Bloomberg News

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

July 01, 2012

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region from non-payment declined, according to traders of credit-default swaps.

The Markit iTraxx Australia index dropped 6 basis points to 178 basis points as of 10:19 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. That’s on track for its biggest one-day decline since June 7 and its lowest close since May 10, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 5 basis points to 168 as of 8:38 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The index is set for its lowest close since May 4, 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 decreased 4 basis points to 173 basis points as of 9:20 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark, which has traded between 217 and 136 this year, is set for the lowest close in more than two months, 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: Tanya Angerer in Singapore at tangerer@bloomberg.net

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


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