Bond Risk Decreases in Asia, Credit-Default Swap Prices Show

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

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 149 basis points as of 9:01 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. (ANZ) prices show. The gauge is set for its lowest close since Sept. 26, according to data provider CMA.

The Markit iTraxx Japan index lost 0.5 of a basis point to 95.8 as of 9:59 a.m. in Tokyo, Citigroup Inc. prices show. The index is headed for a 1.9 basis-point rise this week, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index gained 1 basis point to 121.5 basis points as of 11:51 a.m. in Sydney, according to National Australia Bank Ltd. The index is on course to rise 2.5 basis points this week, CMA data show.

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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