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

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 3 basis points to 199.5 basis points as of 8:44 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index rose to 200.4 basis points on May 18, its highest in four months, according to data provider CMA.

The Markit iTraxx Japan index declined 2 basis points to 216 as of 9:37 a.m. in Tokyo, according to Citigroup Inc. The benchmark jumped to 217.3 basis points on May 18, its highest since Oct. 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 Australia index was little changed at 202 basis points as of 10:43 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The gauge rose to 201 basis points on May 18, its highest since Nov. 29, according to CMA.

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: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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

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