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Asian Default-Swap Index Rolls Into New Series, Bond Risk Rises

The latest series of Markit Group Ltd.’s index measuring the cost of insuring Asian corporate and sovereign bonds from non-payment with credit-default swaps started trading today.

Series 20 of the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was at 141 basis points as of 8:30 a.m. in Hong Kong, according to Australia & New Zealand Banking Group Ltd. prices. The previous version, Series 19, climbed 1 basis point to 119, ANZ prices showed.

A fresh version of the CDS benchmark is created every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading. While indexes for Australia and Japan rolled into their new series on Sept. 20, the shift in the Asia-Pacific index didn’t happen until today due to a public holiday in Hong Kong at the end of last week. The contracts typically have a maturity of five years.

Export-Import Bank of India and Shinhan Bank are the newest members of the Asia ex-Japan list, while Temasek Holdings Pte and Tenaga Nasional Bhd. have been omitted, Markit said on its website.

The Series 20 Markit iTraxx Australia index of 25 borrowers climbed 1 basis point to 117 basis points as of 10:16 a.m. in Sydney, National Australia Bank Ltd. prices showed.

Financial markets in Japan are closed today for a public holiday.

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: Benjamin Purvis in Sydney at bpurvis@bloomberg.net

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

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