Bloomberg News

Corporate Bond Risk in Japan Rises, Credit-Default Swaps Show

September 09, 2012

The cost of protecting corporate bonds in Japan from default rose, according to traders of credit-default swaps.

The Markit iTraxx Japan index increased 1 basis point to 199 as of 9:24 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark fell 14 basis points last week, its biggest decline since the five days ended June 15, 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 fell 1 basis point to 149 as of 10:39 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The index dropped 21 basis points last week, its biggest weekly decrease since the first week of December, according to CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 133.5 basis points as of 8:08 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge fell 20 basis points last week, its biggest weekly drop since March, CMA prices show.

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: 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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