Bloomberg News

Japan Bond Risk Falls to 17-Month Low, Credit-Default Swaps Show

January 09, 2013

The cost of insuring Japanese corporate bonds from non-payment dropped to a 17-month low, according to traders of credit-default swaps.

The Markit iTraxx Japan index fell 5 basis points to 134 basis points as of 09:10 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is on track for the lowest close since August 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 105 basis points as of 08:06 a.m. in Hong Kong, according to prices from Royal Bank of Scotland Group Plc. The measure has declined 8 basis points so far this year, after dropping 93 basis points in 2012, CMA data show.

The Markit iTraxx Australia index gained 2 basis points to 113 basis points as of 11:17 a.m. in Sydney, according to National Australia Bank Ltd. The gauge has fallen 14 basis points since Dec. 31, extending a 53 basis-point drop in 2012, CMA data 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 the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

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


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