Japan, Australia Corporate Bond Risk Rises, Default Swaps Show

The cost of insuring Japanese and Australian corporate bonds from non-payment increased, according to traders of credit-default swaps.

The Markit iTraxx Japan index rose 2.5 basis points to 187 basis points as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The index is set to close at the highest level since June 26, according to data provider CMA.

The Markit iTraxx Australia index increased 2 basis points to 183 basis points as of 10:20 a.m. in Sydney, National Australia Bank Ltd. prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 174 basis points as of 8:30 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge jumped 9.5 basis points yesterday, the biggest one-day increase since June 1, 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.

To contact the reporter on this story: Taejin Park in Seoul at tpark31@bloomberg.net

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

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