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

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

The Markit iTraxx Australia index declined 1 basis point to 110 basis points as of 10:29 a.m. in Sydney, according to National Australia Bank Ltd. prices. The gauge is set for its lowest close since May 29, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 1 basis point to 132 as of 8:21 a.m. in Singapore, Westpac Banking Corp. (WBC) prices show. The measure, which has ranged from 99.5 to 177.8 since Dec. 31, is poised to decline 31.4 basis points this month, 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 dropped 0.5 of a basis point to 83.5 basis points as of 9:16 a.m. in Tokyo, Citigroup Inc. prices show. The indicator, which traded between 74 and 148.1 basis points this year, touched a four-month low of 84 yesterday, CMA data show. A close of 83.5 would be the lowest since May 23.

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: Foster Wong in Hong Kong at fwong94@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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