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

The cost of protecting Asia-Pacific corporate and sovereign bonds from default decreased, according to traders of credit-default swaps.

The Markit iTraxx Japan index fell 3 basis points to 175 basis points as of 9:23 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is set for its biggest one-day drop since Nov. 4, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 2.5 basis points to 192.5 as of 8:26 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.

The Markit iTraxx Australia index declined 1 basis point to 178 basis points as of 11:31 a.m. in Sydney, according to Westpac Banking Corp.

Credit-default swap indexes are benchmarks for protecting 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. A basis point is 0.01 percentage point.

To contact the reporter on this story: Wendy Mock in Hong Kong at wmock3@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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