Bond Risk Increases in Asia and Japan, Default-Swap Prices Show

The cost of insuring corporate and sovereign bonds from non-payment in Asia including Japan increased, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 2.5 basis points to 152.5 basis points as of 8:42 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge has fallen from a one-year high of 177.8 reached on June 24, according to CMA.

The Markit iTraxx Japan index of 50 investment-grade companies rose 0.5 basis point to 102 as of 9:40 a.m. in Tokyo, Citigroup Inc. prices show. The measure is poised to end six consecutive days of declines, according to data provider CMA.

The Markit iTraxx Australia index was little changed at 134 basis points as of 10:40 a.m. in Sydney, according to National Australia Bank Ltd. The gauge ranged from 96.1 to 149.5 last quarter, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

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: Katrina Nicholas at knicholas2@bloomberg.net

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