Bloomberg News

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

July 22, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 8 basis points to 170 basis points as of 8:42 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge is on track for its biggest daily increase since June 1 and its highest close in two weeks, according to data provider CMA.

The Markit iTraxx Australia index advanced 6 basis points to 181 as of 10:31 a.m. in Sydney, National Australia Bank Ltd. (NAB) prices show. The benchmark is poised to close at its highest level 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 Japan index gained 4.5 basis points to 183.5 basis points as of 9:51 a.m. in Tokyo, Citigroup Inc. prices show. The index is set to close at its highest level 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: Taejin Park in Seoul at tpark31@bloomberg.net

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


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