Bloomberg News

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

January 01, 2013

The cost of insuring corporate and sovereign bonds from non-payment in the Asia-Pacific region outside of Japan fell, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan slid 5 basis points to 108 basis points as of 8:59 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc. The index is on course for its lowest close since Dec. 19, according to data provider CMA.

The Markit iTraxx Australia index decreased 3 basis points to 122 as of 11:59 a.m. in Sydney, RBS prices show. The gauge is also set for its lowest close since Dec. 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Markets in Japan are closed for a national holiday. The Markit iTraxx Japan index, which ranged from 136.2 to 229.5 in 2012, fell 27.8 basis points last year to 159 as of Dec. 28, 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.

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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