Japan Corporate Bond Risk Rises, Credit-Default Swap Prices Show

The cost of insuring corporate bonds in Japan against non-payment increased, according to traders of credit-default swaps.

The Markit iTraxx Japan index climbed 2.5 basis points to 116.5 as of 9:32 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge, which has ranged from 101 to 148.1 this year, is on course for its highest close since March 5, CMA data show. The 50-member index rolled to a new series on March 21, with contracts on Ricoh Co. and Sumitomo Chemical Co. replacing Sharp Corp. and Mitsui & Co.

The Markit iTraxx Australia index fell 2 basis points to 120 as of 10:53 a.m. in Sydney, Westpac Banking Corp. prices show. The measure dropped last quarter for the third consecutive period, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 122 basis points as of 8:57 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark has ranged from 100.5 to 122.3 basis points since Dec. 31, CMA data 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: 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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