Bloomberg News

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

November 15, 2012

The cost of insuring corporate and sovereign bonds from non-payment in the Asia-Pacific region increased to a one-month high, according to traders of credit- default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced three basis points to 130.5 basis points as of 8:50 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is on track for its highest close since Oct. 11 and has advanced 6.3 basis points since Nov. 9 for its second straight weekly rise, CMA data show.

The Markit iTraxx Australia index increased six basis points to 153 as of 11:48 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark is also set for its highest close since Oct. 11, according to data provider CMA and has climbed 5.8 basis points over the past five days, the second consecutive weekly increase.

The Markit iTraxx Japan index was little changed at 198 as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The measure has fallen 4.3 basis points this week, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The 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.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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


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