Bloomberg News

Bond Risk Decreases in Japan, Credit-Default Swap Prices Show

December 20, 2012

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

The Markit iTraxx Japan index dropped 1.5 basis points to 158.5 basis points as of 10:20 a.m. in Tokyo, Deutsche Bank AG prices show. The index, which has ranged from 136.2 basis points to 229.5 basis points this year, closed at 157.4 basis points on Dec. 19, its least since April, CMA prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 108 basis points as of 8:42 a.m. in Hong Kong, Credit Agricole SA prices show. The index advanced 1.1 basis points yesterday, rebounding from a 19-month of low of 107 on Dec. 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The benchmark is set to fall for a seventh consecutive month.

The Markit iTraxx Australia index was also little changed at 120 as of 11:42 a.m in Sydney, Credit Agricole 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.

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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