Bloomberg News

Bond Risk Rises in Australia, Japan, Credit-Default Swaps Show

June 24, 2013

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

The Markit iTraxx Japan index advanced 4 basis points to 124.5 basis points as of 10:05 a.m. in Tokyo, Citigroup Inc. prices show. The gauge, which has already risen 25 basis points this month, is on track for its highest close since Feb. 28, according to data provider CMA.

The Markit iTraxx Australia index increased 4 basis points to 149 as of 10:54 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark has risen 37 basis points this month after a 6.4 basis-point jump in May, 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 slid 8 basis points to 167.5 basis points as of 8:57 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The measure, which has ranged from 99.5 basis points to 177.8 basis points this quarter, is set for its lowest close since June 21, according to CMA.

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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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


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