Bloomberg News

Bond Risk in Japan and Australia Rises, Default Swap Prices Show

April 18, 2013

The cost of insuring corporate bonds in Japan and Australia against non-payment increased, according to traders of credit-default swaps.

The Markit iTraxx Japan index advanced 2.5 basis points to 95.5 basis points as of 9:45 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark is set to close at its highest level since April 5, according to data provider CMA.

The Markit iTraxx Australia index rose 1 basis point to 116.5 as of 10:12 a.m. in Sydney, according to Westpac Banking Corp. prices. The measure, which has ranged from 102.3 to 127.5 this year, is poised to close at its highest level since April 8, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 116.5 basis points as of 8:14 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge rose for five straight days through yesterday, 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: Foster Wong in Hong Kong at fwong94@bloomberg.net

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


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