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

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped seven basis points to 193.5 basis points as of 8:05 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc. The gauge is set for its biggest daily loss since Dec. 2, according to data provider CMA.

The Markit iTraxx Australia index slid six basis points to 183 basis points as of 11:04 a.m. in Sydney, Australia & New Zealand Banking Group Ltd. prices show. The index is headed for its largest decline since Dec. 5, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index decreased one basis point to 183 as of 9:06 a.m. in Tokyo, Citigroup Inc. prices show.

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

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

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