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

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

The Markit iTraxx Australia index dropped 3 basis points to 118.5 as of 10:52 a.m. in Sydney, Westpac Banking Corp. prices show. The measure, which declined last quarter for the third consecutive period, is set for its lowest close since March 26, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan retreated 2 to 119 as of 8:32 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark, which has ranged from 100.5 to 122.3 since Dec. 31, is also on course for the lowest since March 26, 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 decreased 1 basis point to 113 as of 9:29 a.m. in Tokyo, according to Deutsche Bank AG prices. The gauge, which has ranged from 101 to 148.1 this year, is poised for its first decline since March 28, 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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