Japan Corporate Bond Risk Falls, Credit-Default Swap Prices Show

The cost of insuring Japanese corporate bonds against non-payment declined, according to credit-default swap traders.

The Markit iTraxx Japan index dropped 10 basis points to 195 basis points as of 9:10 a.m. in Tokyo, Deutsche Bank AG prices show. That’s on course for its biggest daily decline since Oct. 28, 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 Australia index rose 3 basis points in the Asian trading hours to 197 as of 12:10 p.m. in Sydney, according to Royal Bank of Scotland Group Plc. The Australian benchmark declined 17 basis points to 194.5 yesterday, CMA prices in New York show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 2 basis points in the Asian trading hours to 208 as of 9:10 a.m. in Singapore, RBS prices show. The Asian gauge fell 16.5 basis points to 207 yesterday, according to CMA prices in New York.

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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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

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