Bloomberg News

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

August 29, 2012

The cost of insuring corporate and sovereign bonds from non-payment in the Asia-Pacific region outside of Japan rose, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 1 basis point to 151.5 basis points as of 8:39 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is poised for its highest close since Aug. 3 and has traded between 145.8 and 159.8 basis points this month, according to data provider CMA.

The Markit iTraxx Australia index climbed 1 basis point to 161 as of 10:14 a.m. in Sydney, National Australia Bank Ltd. (NAB) prices show. The benchmark, which has traded between 148.3 basis points and 168.2 basis points this month, is on track for its seventh-consecutive daily increase, 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 0.5 of a basis point to 201 basis points as of 9:34 a.m. in Tokyo, Citigroup Inc. prices show. The measure was up 17 basis points this month yesterday, 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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