Bloomberg News

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

August 21, 2012

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 1 basis point to 146 basis points as of 8:43 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge reached a five-month low of 145.8 basis points on Aug. 20, according to data provider CMA.

The Markit iTraxx Japan index advanced 1 basis point to 188.5 as of 9:15 a.m. in Tokyo, Deutsche Bank AG prices show. The index is on course for its highest close since Aug. 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 Australia index dropped 0.75 of a basis point to 149.25 basis points as of 10:15 a.m. in Sydney, according to Deutsche Bank.

Credit-default swap indexes are benchmarks for protecting 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: Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

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


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