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

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

The Markit iTraxx Australia index slid 8 basis points to 180 basis points as of 10:50 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The gauge is set for its lowest close since May 11, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan lost 6.5 basis points to 173.5 basis points as of 8:53 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index is headed for its lowest close since May 8, 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 fell 6 basis points to 168 as of 9:51 a.m. in Tokyo, Citigroup Inc. prices show. The measure is on track to close at its lowest level in more than two months.

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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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

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