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Japan Corporate Bond Risk at Lowest in Three Years, Swaps Show

The cost of insuring corporate bonds from non-payment in Japan is headed for the lowest close in three years, according to traders of credit-default swaps.

The Markit iTraxx Japan index slid 1.5 basis points to 87 basis points as of 9:11 a.m. in Tokyo, Deutsche Bank AG prices show. The measure, which has dropped 72 basis points this year, is poised for its lowest close since April 2010, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 to 111 as of 8:56 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. (ANZ) prices show. The gauge is set for its lowest close since March 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Markets are closed in Australia for a national holiday.

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: Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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