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Australia Corporate Bond Risk Rises, Credit-Default Swaps Show

Feb. 27 (Bloomberg) -- The cost of insuring corporate bonds in Australia against non-payment rose to the highest in almost three weeks, according to traders of credit-default swaps.

The Markit iTraxx Australia index increased 1.75 basis points to 118.75 basis points as of 10:59 a.m. in Sydney, Westpac Banking Corp. prices show. The benchmark is set for its highest close since Feb. 7, paring its decline this month to 0.8 basis point, CMA prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell one basis point to 110 basis points as of 8:49 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge dropped 6.2 basis points since Jan. 31 and 3.4 this year, according to data provider CMA.

The Markit iTraxx Japan index was little changed at 127 basis points as of 9:09 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure has fallen 8.2 basis points in February, taking its 2013 decline to 32 basis points, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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

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