Bloomberg News

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

April 10, 2013

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 116 basis points as of 8:25 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since before the current series began trading on March 20, according to data provider CMA.

The Markit iTraxx Australia index slid 3 basis points to 111.5 as of 10:17 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark is poised for its biggest daily decline since April 2, based on data from CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index dropped 3.5 to 90.5 as of 9:31 a.m. in Tokyo, according to Citigroup Inc. prices. The measure was last lower in November 2010, CMA data 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: Benjamin Purvis in Sydney at bpurvis@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net


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