Bloomberg News

Asia Bond Risk Jumps to 10-Month High, Credit-Default Swaps Show

June 19, 2013

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment surged to the highest in more than ten months, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan soared 19 basis points to 159 basis points as of 8:26 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The benchmark is headed for its highest close since Aug. 2 and biggest daily increase since Sept. 20, according to data provider CMA.

The Markit iTraxx Australia index jumped 13.5 basis points to 141 as of 10:34 a.m. in Sydney, according to Citigroup Inc. prices. The measure is on track for its sharpest rise since March 20 and to close at the highest level since Nov. 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index increased 7.5 basis points to 116 as of 9:28 a.m. in Tokyo, according to Citigroup. The gauge is poised to close at the highest since March 5, 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: Jun Yang in Hong Kong at jyang180@bloomberg.net

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


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