Japan Corporate Bond Risk Falls, Credit-Default Swap Prices Show

The cost of insuring corporate bonds in Japan from default dropped, according to traders of credit- default swaps.

The Markit iTraxx Japan index fell 1 basis point to 182 basis points as of 9:15 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is set for its lowest close since June 20, after declining 4 basis points year to date, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 180.5 basis points as of 8:18 a.m. in Singapore, according to Royal Bank of Scotland Group Plc prices. The measure has declined 26.3 basis points this year, CMA prices show.

The Markit iTraxx Australia index was little changed at 186.5 basis points as of 11:06 a.m. in Sydney, Australia & New Zealand Banking Group Ltd. (ANZ) prices show. The gauge increased 4.9 basis points this year, according to CMA.

Credit-default swap indexes are benchmarks for insuring 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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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

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