Bond Risk Rises in Asia Outside Japan, Default Swap Prices Show

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 157 basis points as of 8:36 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The measure is set to rise for the first time in three trading days, according to data provider CMA.

The Markit iTraxx Australia index rose 2 basis points to 135 as of 10:32 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge, which fell 3.1 basis points last week, is on track to close at its highest level since July 4, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index was little changed at 103.3 basis points as of 9:19 a.m. in Tokyo, according to Citigroup Inc. The benchmark is on track for its lowest close since July 2 after falling 6.3 basis points last week, 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: Foster Wong in Hong Kong at fwong94@bloomberg.net

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

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