Australia, Japan Corporate Bond Risk Rises, Default Swaps Show

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

The Markit iTraxx Australia index rose 2 basis points to 195 basis points as of 1:33 p.m. in Sydney, according to Westpac Banking Corp. The gauge is set for its first increase in three days, according to data provider CMA.

The Markit iTraxx Japan index climbed 2.5 basis points to 192 as of 10:56 a.m. in Tokyo, Deutsche Bank AG prices show. That’s on course for its highest level since Dec. 2, according to 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 was little changed at 211 basis points as of 9:05 a.m. in Hong Kong, Credit Agricole prices show. The benchmark rose 10.7 basis points last week, the biggest weekly jump in three weeks, 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 reporters on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net; Sarah McDonald in Sydney at smcdonald23@bloomberg.net

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

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