Bloomberg News

Japan Corporate Bond Risk Decreases, Credit-Default Swaps Show

July 19, 2012

The cost of protecting Japanese corporate bonds from default dropped, according to traders of credit-default swaps.

The Markit iTraxx Japan index fell 1 basis point to 177 basis points as of 9:26 a.m. in Tokyo, according to Citigroup Inc. The gauge is set for its lowest close since July 11, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 161 basis points as of 8:27 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark has ranged between 161.5 and 173.5 this month, 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 little changed at 171 basis points as of 10:24 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The measure is set to decrease for a third straight week, according to CMA.

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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