Bloomberg News

Japan Corporate Bond Risk Falls, Credit-Default Swap Prices Show

March 03, 2013

The cost of insuring Japanese corporate bonds from non-payment fell, according to traders of credit-default swaps.

The Markit iTraxx Japan index decreased 2 basis points to 121 basis points as of 9:24 a.m. in Tokyo, Citigroup Inc. prices show. The index is on track for its lowest close since Feb. 14, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 109 basis points as of 8:22 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge rose 1.1 basis point in the five days to March 1, its first weekly increase in a month, 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 also little changed at 115.5 as of 11:24 a.m. in Sydney, according to Westpac Banking Corp. The index rose 5.8 basis points last week, its biggest one-week increase since November, according to CMA.

Credit-default swap indexes are benchmarks for protecting 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. A basis point is 0.01 percentage point.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

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


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