Bloomberg News

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

August 06, 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 Australia index rose 2 basis points to 158 basis points as of 10:29 a.m. in Sydney, Credit Agricole SA (ACA) prices show. The gauge dropped 11 basis points to 156 basis points yesterday, the lowest since May 3, according to data provider CMA.

The Markit iTraxx Japan index increased 1.5 basis points to 206.5 as of 9:10 a.m. in Tokyo, Deutsche Bank AG prices show. The measure is poised for its highest close since May 24, CMA prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 1 basis point to 149.5 as of 8:12 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The index has declined 11 basis points over the previous two trading days, according to CMA, which is owned by McGraw- Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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


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