Bloomberg News

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

July 10, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 2 basis points to 168.5 as of 8:53 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark has traded between 210 and 132.5 since Jan. 1, according to CMA.

The Markit iTraxx Japan index rose 2 basis points to 177 as of 9:24 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is set for its highest close since July 9, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index was unchanged at 181 basis points as of 10:20 a.m. in Sydney, National Australia Bank Ltd. (NAB) prices show. The measure has ranged between 211 and 128 this year, 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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