Bloomberg News

Bond Risk Decreases in Asia, Credit-Default Swap Prices Show

January 16, 2013

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased two basis points to 109 basis points as of 8:19 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc prices. The measure has declined 4.4 basis points this year, after sliding 93 in 2012, according to data provider CMA.

The Markit iTraxx Japan index dropped two basis points to 140 as of 9:19 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark has fallen 19 basis points this year, 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 was little changed at 116 as of 11:20 a.m. in Sydney, according to National Australia Bank Ltd. prices. The gauge has retreated 11.5 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: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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


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