Bloomberg News

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

October 16, 2012

The cost of insuring Asia-Pacific corporate and sovereign bonds from default declined, according to traders of credit-default swaps.

The Markit iTraxx Australia index dropped 6 basis points to 138 basis points as of 11:10 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. (ANZ) The gauge is on course for its lowest close since Sept. 19, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 5 to 117.5 as of 8:20 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure is also set for its lowest close since Sept. 19, 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 slid 6 basis points to 212 as of 9:08 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is on track for the lowest close since Sept. 21, according to CMA.

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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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


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