Bloomberg News

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

February 25, 2013

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 4 basis points to 111.5 basis points as of 8:19 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is on course for its highest close since Feb. 11, according to data provider CMA.

The Markit iTraxx Japan index increased 3.5 basis points to 127 as of 9:09 a.m. in Tokyo, according to Deutsche Bank AG prices. The gauge is set for its highest close since Feb. 8, 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 advanced 3 basis points to 118 basis points as of 10:38 a.m. in Sydney, National Australia Bank Ltd. prices show. The benchmark is poised for its highest since Feb. 8, 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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