Japan Bond Insurance Costs Increase, Default Swap Prices Show

The cost of insuring corporate bonds in Japan against non-payment rose, according to traders of credit-default swaps.

The Markit iTraxx Japan index advanced 0.5 of a basis point to 93 basis points as of 9:17 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is poised to rise 4 basis points this week, according to data provider CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 149 basis points as of 8:09 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. Series 20 of the index began trading on Sept. 23 with Export-Import Bank of India and Shinhan Bank the newest members.

Fresh versions of the benchmarks are created every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading. The indexes typically have a maturity of five years.

The Markit iTraxx Australia index was also little changed at 119 basis points as of 10:55 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge is set for its lowest close since Sept. 20, when the new series 20 of the index began trading, 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.

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