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Asia-Pacific Bond Risk Rises, Credit-Default Swap Prices Show

The cost of insuring bonds in the Asia-Pacific region from non-payment increased for a second day, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 145.5 basis points as of 9:09 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark is on course for its highest close since Aug. 2, according to data provider CMA.

The Markit iTraxx Australia index advanced 1 basis point to 120 as of 10:19 a.m. in Sydney, according to National Australia Bank Ltd. The gauge is also headed for its second daily increase to its highest level this week, according to CMA.

The Markit iTraxx Japan index climbed 0.5 of a basis point to 98 as of 10:03 a.m. in Tokyo, Citigroup Inc. prices show. The measure is also poised for its second daily increase to the highest since Aug. 1, 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. An increase signals deteriorating perceptions of creditworthiness, while a drop 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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