Bloomberg News

Bond Risk Decreases in Asia, Credit-Default Swap Prices Show

July 30, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 1 basis point to 159 basis points as of 8:45 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge has fallen 11 basis points this month and has ranged between 132.5 basis points and 210 basis points this year, according to data provider CMA.

The Markit iTraxx Australia index was little changed at 167 as of 10:45 a.m. in Sydney, Credit Agricole prices show. The measure fell 7.4 basis points yesterday to that level, its lowest 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 was also little changed at 182 basis points as of 9:29 a.m. in Tokyo, Citigroup Inc. 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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