Bloomberg News

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

January 03, 2013

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

The Markit iTraxx Japan index dropped 10 basis points to 148 basis points as of 9:16 a.m. in Tokyo, Citigroup Inc. prices show. That’s the biggest one-day decline since Sept. 7 and puts the index on track for its lowest close since March last year, according to data provider CMA. Markets in Japan have been closed since Dec. 28 due to national holidays.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 2 basis points to 101.5 as of 8:19 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure is set for its lowest close in two years and its first weekly decline since the five-day period ending Dec. 14, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index fell 2 basis points to 114 basis points as of 11:17 a.m. in Sydney, according to Westpac Banking Corp. The index is on course for its lowest close in 17 months, according 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: Tanya Angerer in Singapore at tangerer@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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