Bond Risk Falls in Australia, Credit-Default Swap Pricing Shows

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

The Markit iTraxx Australia index fell 1 basis point to 152.5 basis points as of 11:43 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The index declined for a second week last week and was down about 35 basis points this half as of Oct. 12, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 128 as of 8:22 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge fell 3.4 basis points last week, 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 224 basis points as of 9:25 a.m. in Tokyo, Deutsche Bank AG prices show. The index rose 1.2 basis points last week and has ranged from 136.2 basis points to 229.5 basis points this year, according to CMA.

Credit-default swap indexes are be22nchmarks 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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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