Bloomberg News

Australia Corporate Bond Risk Rises, Credit-Default Swaps Show

November 27, 2012

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

The Markit iTraxx Australia index increased one basis point to 133 basis points as of 12:04 p.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The measure is set for its first increase since Nov. 16 after closing at a eight- month low yesterday, according to CMA prices in New York.

The Markit iTraxx Japan index fell half a basis point to 170.5 as of 9:16 a.m. in Tokyo, Deutsche Bank AG prices show. The index, which has ranged from 168.5 to 229.5 since June 30, is headed for its lowest since July 4, 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 little changed at 113 basis points as of 8:46 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge has ranged from 112.4 basis points to 175.3 basis points this half, according to CMA.

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. 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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