Bloomberg News

Asia Credit Risk Set to Rise Most in 21 Months, Swap Prices Show

June 27, 2013

The cost of insuring corporate and sovereign bonds in Asia from non-payment is poised to rise the most in 21 months in June, credit-default swap traders said.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan gained 1 basis point to 151.5 basis points as of 8:26 a.m. in Hong Kong, Westpac Banking Corp. prices show. The gauge is set to climb 35.1 basis points this month, the most since September 2011, and 29.3 basis points this quarter, according to data provider CMA.

The Markit iTraxx Australia index was little changed at 136 as of 10:29 a.m. in Sydney, according to National Australia Bank Ltd. The index is on course to rise 23.6 basis points this month and 13 basis points this quarter, 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 slid 1 basis point to 110.5 basis points as of 9:29 a.m. in Tokyo, Citigroup Inc. prices show. The index is on track for its lowest close since June 19 and poised to rise 14 basis points this month.

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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