Japan, Australia Bond Risk Increases, Credit-Default Swaps Show

Jan. 29 (Bloomberg) -- The cost of insuring corporate bonds rose in Japan and Australia, according to traders of credit-default swaps.

The Markit iTraxx Japan index climbed one basis point to 135.5 basis points as of 9:08 a.m. in Tokyo, Deutsche Bank AG prices show. The measure is on track to rise for a second day, according to data provider CMA.

The Markit iTraxx Australia index also advanced one basis point to 116.5 as of 11:06 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark is set for the highest close since Jan. 24, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 106 as of 8:05 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is down from 113.4 at the end of last year, according to CMA.

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: Jun Yang in Hong Kong at jyang180@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net