Bloomberg News

Australia Bond Risk Increases, Credit-Default Swap Prices Show

December 23, 2012

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

The Markit iTraxx Australia index climbed 1 basis point to 123.5 basis points as of 11:32 a.m. in Sydney, according to Westpac Banking Corp. The index has fallen 6.7 basis points this month, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was quoted at about 111 basis points as of 8:46 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc. The gauge closed at 110 basis points on Dec. 21, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The index is little changed from the end of last month.

Markets in Japan are closed for a national holiday.

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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