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

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

The Markit iTraxx Australia index climbed 4 basis points to 152 as of 10:33 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark rose for the first time in three days yesterday to 151 basis points, according to data provider CMA. A basis point is 0.01 percentage point.

The Markit iTraxx Japan index increased 2 basis points to 202.5 as of 9:16 a.m. in Tokyo, Deutsche Bank AG prices show. The index also advanced yesterday after dropping 12 basis points on Sept. 7, its biggest one-day decline since Oct. 28, according to 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 was little changed at 132.5 basis points as of 8:34 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge fell for a fifth consecutive day yesterday, CMA prices show.

Credit-default swap indexes are benchmarks for protecting 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.

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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