Bloomberg News

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

July 18, 2012

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

The Markit iTraxx Australia index slid 4 basis points to 172 basis points as of 10:31 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The gauge is set for its lowest close since July 4, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan lost 2 basis points to 163 as of 8:19 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The index is also headed for its lowest close since July 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 fell 1.5 basis points to 177.5 basis points as of 9:36 a.m. in Tokyo, Citigroup Inc. prices show.

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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