The yield premium on the August 2018 securities narrowed to 266 basis points as of 12:15 p.m. in Hong Kong after pricing at 270 above similar-maturity Treasuries yesterday, according to prices from Royal Bank of Scotland Group Plc. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped to 139.7 basis points yesterday, the lowest since July 24. It traded near that level at 140.5 as of 8:29 a.m. in Singapore, Westpac Banking Corp. prices show.
Chinese bonds gained for the first time in three weeks in the five days through Aug. 9, according to JPMorgan Chase & Co. indexes. Government data released last week showed rebounding exports and manufacturing in the world’s second-largest economy even after Premier Li Keqiang engineered the worst cash crunch in at least a decade.
“Risk appetite has improved and Asian investors still have a lot of liquidity to put to work,” said Cheng Duan Pang, head of fixed income at Manulife Asset Management (Singapore) Pte. “Credit selection remains important and it helps that they are familiar with Asian names.”
The Markit iTraxx Australia index fell 2 basis points to 116 basis points as of 10:16 a.m. in Sydney, according to Westpac prices. The benchmark is set to drop for a fourth straight day, poised for its lowest level since Aug. 6, according to data provider CMA.
The Markit iTraxx Japan index was also little changed at 94 basis points as of 9:17 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is down 6.2 basis points this month and set for its lowest close since Aug. 9, 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.
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