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Default Swaps Paying Most to Bonds Since 2009: Australia Credit

Concerns about the global economy slowing have infected Australia’s credit markets, driving price discrepancies between bonds and derivatives to the widest since March 2009.

The cost of credit-default swaps climbed faster than relative yields on corporate notes last month as Europe’s debt crisis and the U.S. credit rating downgrade spurred both gauges of investor sentiment to deteriorate. The Markit iTraxx Australia index of swaps on 25 companies surged 38 basis points to 157, more than double the increase in the U.S., creating a so-called positive basis, where the return from selling the contracts is more than the yield premium from buying the notes.