Bloomberg News

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

January 10, 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 Asia index of 40 investment-grade borrowers outside Japan retreated one basis point to 103 basis points as of 8:17 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc prices. The measure has declined 10 basis points this year, after sliding 93 basis points in 2012, according to data provider CMA.

The Markit iTraxx Japan index fell three basis points to 135 as of 9:23 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is on track for its 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 Australia index decreased one basis point to 112 basis points as of 11:13 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge has fallen 15.5 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: Foster Wong in Hong Kong at fwong94@bloomberg.net

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


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