Bloomberg News

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

July 12, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 168 as of 8:05 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark is set for its highest close since July 9, trading between 210 and 132.5 since Jan. 1, according to CMA.

The Markit iTraxx Australia index advanced 2 basis points to 179 basis points as of 10:11 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The measure has ranged between 211 and 128 this year, 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 advanced 1 basis point to 179 as of 9:07 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is poised for its highest close since June 28, CMA prices 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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