Bond Risk Rises in Japan, Australia, Credit-Default Swaps Show

The cost of insuring corporate bonds from non-payment rose in Japan and Australia, according to credit-default swap traders.

The Markit iTraxx Japan increased 2 basis points to 195 basis points as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is poised for its highest close since Aug. 8, according to data provider CMA.

The Markit iTraxx Australia increased 1 basis point to 153 as of 11:16 a.m. in Sydney, Credit Agricole SA prices show. The gauge is set for a second daily rise, after a four day drop that brought the index to its lowest level since April 4, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell by 2 basis points to 146 basis points as of 9:17 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index has traded between 145.8 basis points and 159.8 basis points this month.

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: Wendy Mock in Hong Kong at wmock3@bloomberg.net

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