Bloomberg News

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

July 04, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 2 basis points to 164.5 basis points as of 8:45 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark, which has ranged between 210 and 132.5 this year, is set to rise for the first time in eight days, according to data provider CMA.

The Markit iTraxx Australia index increased 3 basis points to 170 as of 10:20 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The measure reached a high for the year of 211 basis points on June 4, according to CMA, which is owned by McGraw- Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index rose 3 basis points to 170 basis points as of 9:45 a.m. in Tokyo, RBS prices show. The gauge fell to 168.5 yesterday, its lowest since April 12, CMA data show.

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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