Australian Bond Risk Advances, Credit-Default Swap Prices Show

The cost of insuring Australian corporate bonds from non-payment rose, according to traders of credit-default swaps.

The Markit iTraxx Australia index climbed 1 basis point to 97 basis points as of 11:24 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge is poised for a 3.25 basis points retreat in December and a 30.5 basis points decrease for 2013, its second year of decline, CMA data show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 127 basis points as of 8:20 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The benchmark is set to fall 4 basis points this month, paring its advance for the year to 13.65 basis points, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market. A basis point is 0.01 percentage point.

Markets in Japan are closed for a public holiday. The price of insuring against default in Asia’s second-largest economy dropped 91 basis points this year to 67.81 basis points, CMA data shows. The gauge closed at its lowest since May 2008 on Dec. 26.

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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