Bloomberg News

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

July 26, 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 Asia index of 40 investment-grade borrowers outside Japan dropped 6 basis points to 167 basis points as of 8:34 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge, which has traded between 161.5 basis points and 175.3 basis points this month, is headed for its lowest close since July 20, according to data provider CMA.

The Markit iTraxx Australia index slid 8 basis points to 177 as of 10:48 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The index is on track for its biggest one-day drop since July 2 and its lowest close since July 20, 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 6 basis points to 184 basis points as of 9:27 a.m. in Tokyo, Citigroup Inc. prices show. The index has risen from 178 basis points at the start of the month, 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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