Asia Bond Risk Drops to 19-Month Low, Credit-Default Swaps Show

The cost of insuring corporate and sovereign bonds in Asia from non-payment fell to a 19-month low, according to prices from credit-default swap traders and data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 1 basis point to 108 basis points as of 8:44 a.m. in Hong Kong, according to Credit Agricole SA. (ACA) The index is set for its lowest close since May 2011, CMA prices show.

The Markit iTraxx Australia index declined 1 basis point to 119.5 as of 11:44 a.m in Sydney, Credit Agricole prices show. That’s set for its lowest since August last year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index also fell 1 basis point to 156 basis points as of 9:34 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is headed for its least in more than eight months, 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.

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