Bloomberg News

Swaps Show Bond Risk Falling to 2011 Lows in Australia, Japan

March 07, 2013

The cost of insuring corporate bonds from non-payment in Australia and Japan declined to the lowest since 2011, according to traders of credit-default swaps.

The Markit iTraxx Australia index slid 3 basis points to 108 basis points as of 11:41 a.m. in Sydney, according to National Australia Bank Ltd. The gauge is on course for its lowest close since May 2011, according to data provider CMA.

The Markit iTraxx Japan index fell 4 basis points to 109 as of 9:44 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark is dropping for an eighth straight day, a streak of declines that has taken it to the lowest levels since March 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1.5 basis points to 103 basis points as of 8:50 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The measure is set for its lowest close since Jan. 7, 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.

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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