Asia-Pacific Bond Risk Falls, Credit-Default Swap Prices Show

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment declined, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan slid to 111.5 basis points as of 8:23 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge dropped from 114 basis points at the end of last week and is headed for its lowest close since Jan. 29, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

Markets across Asia were closed for the first two days of this week due to Lunar New Year celebrations and remain shut today in Hong Kong and mainland China.

The Markit iTraxx Australia index fell 2.5 basis points to 114 basis points as of 11:20 a.m. in Sydney, according to Westpac Banking Corp.

The Markit iTraxx Japan index fell 2.5 basis points to 123.5 basis points as of 9:17 a.m. in Tokyo, Deutsche Bank AG 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 the reporter on this story: Benjamin Purvis in Sydney at bpurvis@bloomberg.net

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

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