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

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

The Series 19 Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan rose 2 basis points to 120 basis points as of 8:03 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. Series 18 of the index also advanced 2 basis points to 104, RBS prices show.

The Series 19 Markit iTraxx Australia index added 2 basis points to 120.5 as of 11:11 a.m. in Sydney, according to Westpac Banking Corp. prices. Series 18 of the Markit iTraxx Australia index is at 106 basis points, Westpac prices show.

The Series 19 Markit iTraxx Japan index rose 2 basis points to 103 as of 9:02 a.m. in Tokyo, according to Citigroup Inc. prices. The earlier Series 18 index climbed 3 to 108, Citigroup prices show.

Fresh versions of the benchmarks are created every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading. The maturity date of the new indexes is June 2018, compared with December 2017 on the Series 18 versions.

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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