Bloomberg News

Japan Bond Risk Decreases, Credit-Default Swap Prices Show

October 28, 2012

The cost of insuring corporate bonds in Japan from non-payment fell, according to traders of credit- default swaps.

The Markit iTraxx Japan index dropped 1.5 basis point to 206.5 basis points as of 9:32 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge, which has ranged from 136.2 to 229.5 this year, is on track for its lowest close since Oct. 25, according to CMA.

The Markit iTraxx Australia index was little changed at 143 as of 11:04 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The measure has ranged from 128.2 to 211.1 this year, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was also little changed at 123 basis points as of 8:21 a.m. in Hong Kong, Credit Agricole SA prices show. The index rose 6.3 basis points last week, 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: 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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