Australian Corporate Bond Risk Surges to Highest Since November

Australian corporate bond risk surged to a more than six-month high, according to traders of credit- default swaps. Asia and Japan risk gauges also climbed.

The Markit iTraxx Australia index jumped 10 basis points to 212 basis points as of 10:15 a.m. in Sydney, according to Westpac Banking Corp. (WBC) prices. The index of default swap contracts on 25 companies is set for the highest close since Nov. 28, and the biggest daily increase since May 16, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 5 basis points to 210.5 as of 9 a.m. in Hong Kong, Deutsche Bank AG prices show. The gauge is on course for its highest close since Dec. 20, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index increased 5.5 basis points to 205.5 basis points as of 10:07 a.m. in Tokyo, Citigroup Inc. prices show.

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

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