Bloomberg News

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

October 24, 2012

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

The Markit iTraxx Japan index increased 2 basis points to 211 basis points as of 10:01 a.m. in Tokyo, Citigroup Inc. prices show. The measure, which has ranged from 168.5 basis points to 229.5 basis points since June, is set for its highest close since Oct. 17, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 1.5 to 123 as of 8:03 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge, which has ranged from 112.6 to 175.3 in the second half, is set for its fifth-consecutive day of increases, according to CMA.

The Markit iTraxx Australia index advanced 1 to 143 as of 11:02 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The benchmark is on course for its highest close since Oct. 16, according to data provider 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.

To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net

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


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