Bloomberg News

Asia Bond Risk Drops to One-Week Low, Credit-Default Swaps Show

December 09, 2012

The cost of insuring corporate and sovereign bonds in Asia from non-payment fell to the lowest in a week, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 0.5 of a basis point to 113 basis points as of 8:23 a.m. in Hong Kong, Credit Agricole SA prices show. The gauge is set for its lowest close since Dec. 3, according to data provider CMA.

The Markit iTraxx Japan index declined 0.5 of a basis point to 170 as of 9:23 a.m. in Tokyo, Citigroup Inc. prices show. The index is on track for its lowest close since Dec. 5, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index was little changed at 126.5 basis points as of 11:23 a.m. in Sydney, according to Credit Agricole. The index fell 3.6 basis points last week, CMA prices show.

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: 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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