Bloomberg News

Corporate Bond Risk Falls in Japan, Credit-Default Swaps Show

January 20, 2013

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

The Markit iTraxx Japan index declined two basis points to 136 basis points as of 9:21 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure is set for its lowest close since August 2011, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 106.5 basis points as of 8:44 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge has ranged from 102.8 to 110.1 this year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia was also little changed at 114.5 as of 10:39 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices. The benchmark has ranged from 111.6 to 127.5 this year, CMA prices 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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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


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