Japan, Australia Bond Risk Increases, Credit-Default Swaps Show
The cost of insuring Japanese and Australian corporate and sovereign bonds from default rose, according to traders of credit-default swaps.
The Markit iTraxx Japan index climbed 1 basis point to 164 basis points as of 9:48 a.m. in Tokyo, Deutsche Bank AG prices show. The index is set to close up 7 basis points since close on March 21, when the new Series 17 started trading, according to data provider CMA.
The Markit iTraxx Australia index jumped 5 basis points to 143 basis points as of 11:46 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The previous Series 16 index closed at 124.9 on March 20, dropping from 180.5 on Dec. 30, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
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.
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