Bloomberg News

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

January 17, 2013

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped three basis points to 106 basis points as of 8:31 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge has fallen seven basis points this year, according to data provider CMA.

The Markit iTraxx Japan index fell three basis points to 138.5 as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is on track for its lowest close since Jan. 11, 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 retreated two basis points to 115 as of 11:50 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The measure has dropped 12.5 this year, 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: 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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