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

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment rose, according to traders of credit-default swaps.

The Markit iTraxx Australia index advanced 2 basis points to 106 basis points as of 11:01 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge, which has ranged from 96.1 to 149.5 this year, is headed for its third consecutive increase, set to pare its decrease this month to 19.2 basis points, according to data provider CMA.

The Markit iTraxx Japan index increased 1.5 basis points to 85.8 as of 9:03 a.m. in Tokyo, according to Citigroup Inc. prices. The measure, which closed at a four-week low yesterday, is poised to drop 11.5 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 Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 133.5 basis points as of 8:50 a.m. in Singapore, Westpac prices show. The benchmark is on track for its highest close since Oct. 16, 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: 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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