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

The cost of insuring corporate and sovereign bonds from non-payment in the Asia-Pacific region declined, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 4.5 basis points to 155.5 basis points as of 8:44 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is poised for its biggest one-day fall since Aug. 5 and its lowest close since Aug. 19, according to data provider CMA.

The Markit iTraxx Australia index slid 3 basis points to 124 as of 10:26 a.m., according to Westpac Banking Corp. The index is on course for its first decline since Aug. 14 and its lowest close since Aug. 19, 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 fell 2 basis points to 98 basis points as of 9:25 a.m. in Tokyo, Citigroup Inc. prices show. The index is also on track for its lowest close since Aug. 19, 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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