Bloomberg News

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

July 15, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan slid 3 basis points to 161.5 basis points as of 8:42 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc. The gauge is set for its lowest close since July 4, according to data provider CMA.

The Markit iTraxx Australia index fell 2 basis points to 174.5 as of 10:36 a.m. in Sydney, Australia & New Zealand Banking Group Ltd. prices show. The index is headed for its lowest close since July 11, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Markets in Japan are closed today for a national holiday.

Credit-default swap indexes are benchmarks for protecting 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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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


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