Japan Corporate Bond Risk Rises, Credit-Default Swap Prices Show

The cost of insuring Japanese corporate bonds from non-payment increased, according to traders of credit-default swaps.

The Markit iTraxx Japan index gained 1 basis point to 92 basis points as of 9:28 a.m. in Tokyo, Deutsche Bank AG prices show. The index is on track for its highest close since July 12, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 137.5 basis points as of 8:32 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge has ranged from 136.6 basis points to 163 basis points this month, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index was also little changed at 126 basis points as of 10:29 a.m. in Sydney, according to National Australia Bank Ltd. The index has ranged from 125.5 to 139.8 this month, according to CMA.

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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