Bond Risk in Asia Declines, Traders of Credit-Default Swaps Say

The cost of protecting bonds in Asia against non-payment decreased, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 4 basis points to 185.5 as of 8:13 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge is on course for its lowest close since Oct. 31, according to data provider CMA.

The Markit iTraxx Japan index declined 2 basis points to 166 as of 9:15 a.m. in Tokyo, Deutsche Bank AG prices show. The measure is set for its lowest close since Oct. 31, according to CMA, which is owned by CME Group Inc., and compiles prices quoted by dealers in the privately negotiated market.

The Australian market is closed today due to a holiday.

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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