Australian Bond Risk Falls, Credit-Default Swap Prices Show
The cost of insuring corporate bonds in Australia from non-payment declined, according to traders of credit-default swaps.
The Markit iTraxx Australia index dropped 2 basis points to 175 basis points as of 10:20 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The index fell 11 basis points yesterday and has traded between 211 and 128 this year, according to data provider CMA.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 170 as of 8:17 a.m. in Singapore, Standard Chartered Plc prices show. The index, which has ranged between 210 and 132.5 this year, had fallen for five consecutive days prior, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
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.
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