Bond Risk Increases in Asia, Credit-Default Swap Prices Show

The cost of insuring corporate and sovereign bonds from non-payment rose in Asia outside of Japan, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 1 basis point to 151.5 basis points as of 8:50 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is on track for its highest close since Aug. 3, according to data provider CMA.

The Markit iTraxx Australia index was little changed at 157 basis points as of 10:42 a.m. in Sydney, Credit Agricole SA prices show. The measure has ranged between 155 basis points and 186 basis points this quarter, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index was also little changed at 186 basis points as of 9:33 a.m. in Tokyo, Deutsche Bank AG prices show. The benchmark, which has ranged between 168.5 basis points and 207 basis points this quarter, fell 1.8 basis points to 184.8 yesterday, the lowest since Aug. 1, CMA prices show.

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 Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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

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