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 rose, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 2 basis points to 142.5 basis points as of 08:39 a.m. in Singapore, Westpac Banking Corp. (WBC) prices show. The gauge is set for its highest close since Sept. 26, according to data-provider CMA.

The Markit iTraxx Japan index jumped 3.5 basis points higher to 103 basis points as of 9:21 a.m. in Tokyo, Citigroup Inc. prices show. The measure is headed for its highest level since April 4, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index rose 2 basis points to 132 as of 10:20 a.m. in Sydney, according to Westpac prices. The benchmark is set to close at its highest level since Nov. 28, CMA data show.

“We expect continued volatility until we get a more stable U.S. rates environment and ultimately a clearer picture on QE tapering,” said Glenn Hodgeman, global head of credit trading at Westpac.

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: Paulina Duran in Sydney at pduran10@bloomberg.net

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

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