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Australia, Japan Bond Risk Rises, Credit-Default Swaps Show

The cost of protecting Australian and Japanese corporate bonds from default rose, according to traders of credit-default swaps.

The Markit iTraxx Australia index increased 3.5 basis points to 157.5 basis points as of 10:55 a.m. in Sydney, according to Deutsche Bank AG. The gauge was on course for its biggest daily advance since April 16, according to CMA data.

The Markit iTraxx Japan index advanced 1.5 basis points to 182.5 as of 10:09 a.m. in Tokyo from its April 27 close, Citigroup Inc. prices show. The measure has gained for seven days, the longest string of increases since November, the data show. Markets were closed yesterday in Japan for a public holiday, and are shut in Hong Kong and Singapore today.

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: Sarah McDonald in Sydney at smcdonald23@bloomberg.net

To contact the editors responsible for this story: Beth Thomas at bthomas1@bloomberg.net; Shelley Smith at ssmith118@bloomberg.net

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