Asia Bond Risk Jumps to 2-Month High, Credit-Default Swaps Show

The cost of insuring corporate and sovereign bonds against non-payment in Asia excluding Japan rose to the highest in more than two months, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan jumped 8 basis points to 175 basis points as of 8:13 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge, which advanced 9.7 basis points yesterday, is set for its highest close since June 24, according to data provider CMA.

The Markit iTraxx Australia index increased 7 basis points to 129 as of 10:14 a.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark is poised for its biggest one-day gain since June 24 and its highest close since July 12, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index rose 3 basis points to 100 basis points as of 9:14 a.m. in Tokyo, according to Citigroup Inc. prices. The measure, which has ranged from 90.9 to 110.2 this quarter, is on course for its biggest one-day increase since July 25, according to CMA.

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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