Bloomberg News

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

February 03, 2013

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

The Markit iTraxx Australia index dropped two basis points to 117 basis points as of 11:26 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark is set to extend its decline this year to 10.5 basis points, after retreating for a fifth straight month in January, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased two basis points to 113 as of 8:26 a.m. in Hong Kong, Westpac prices show. The gauge climbed 2.8 basis points in January, rising for a second consecutive month, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index fell one basis point to 128 basis points as of 9:28 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is headed for its lowest level since August 2011, 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: Tanya Angerer in Singapore at tangerer@bloomberg.net

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


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