Bloomberg News

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

July 29, 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 7 basis points to 160 basis points as of 8:41 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge, which closed last week down 6.4 basis points this month, is headed for its lowest close since April 4, according to data provider CMA.

The Markit iTraxx Australia index fell 4 basis points to 167 as of 10:46 a.m. in Sydney, National Australia Bank Ltd. (NAB) prices show. The measure is on track for its lowest close since May 8, 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 declined 6 basis points to 179 basis points as of 9:20 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark has traded between 168.5 and 188.8 this 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 Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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


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