Japan Corporate Bond Risk Tumbles, Credit-Default Swaps Show

April 5 (Bloomberg) -- The cost of insuring corporate bonds in Japan against non-payment tumbled the most in seven months, according to traders of credit-default swaps.

The Markit iTraxx Japan index slid 11 basis points to 95 as of 9:29 a.m. in Tokyo, according to Citigroup Inc. prices. That brings the gauge to its lowest level since before the record earthquake that devastated the nation’s northeast on March 11, 2011, according to data provider CMA. The measure is poised for its lowest close since Nov. 29, 2010, and its biggest one-day drop since Sept. 7, CMA prices show.

The Markit iTraxx Australia index fell 1 basis point to 119 as of 10:36 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark has ranged from 102.3 basis points to 127.5 this year, 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 121.5 basis points as of 8:33 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure has ranged from 100.5 to 122.3 since Dec. 31, 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: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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