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

The cost of insuring corporate and sovereign bonds against non-payment in the Asia-Pacific region dropped for the first time in three days, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 165 basis points as of 9:09 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge, which advanced 11.1 basis points over the last two days to a two-month high, is set for its first decline since Aug. 26, according to data provider CMA.

The Markit iTraxx Australia index decreased 1 basis point to 128 as of 10:16 a.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark is also poised for its first decline in three days, 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 declined 1 basis point to 98 basis points as of 9:16 a.m. in Tokyo, according to Citigroup Inc. prices. The measure, which has ranged from 90.9 to 110.2 this quarter, is down 2.2 basis points from July 31, 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: 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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