Australia and Japan Bond Risk Falls, Credit Default Swaps Show

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

The Markit iTraxx Australia index retreated 1.5 basis points to 104 basis points as of 11:46 a.m. in Sydney, according to Citigroup Inc. The measure, which is falling for a second day, is poised for a 1.1 basis-point rise this week, according to data provider CMA.

The Markit iTraxx Japan index declined 1 basis point to 80 as of 9:40 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is falling for a third consecutive day and is on track for a 5 basis-point decrease this week, which would be the most since the five days ended Nov. 15, 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 was little changed at 132 basis points as of 8:41 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The benchmark is poised for a 1.7 basis-point drop 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. A basis point is 0.01 percentage point.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

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

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