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Japan, Australia Company Bond Risk Declines, Default Swaps Show

By Laura Cochrane and Oliver Biggadike

March 18 (Bloomberg) -- The cost to protect corporate bonds in Japan and Australia from default fell, according to traders of credit-default swaps.

The Markit iTraxx Australia Series 8 Index dropped 11.5 basis points to 196.5 at 10:58 a.m. in Sydney after earlier declining to as low as 192 basis points, according to Citigroup Inc. The index contains credit-default swaps tied to 25 borrowers including Macquarie Group Ltd. and Qantas Airways Ltd.

Japan's benchmark fell 16 basis points to 224 basis points, Morgan Stanley prices show. The benchmark of 50 investment-grade Japanese companies, including All Nippon Airways Co. and Japan Tobacco Inc., declines as investors' perceptions of credit quality improve.

The indexes are used to speculate on shifts in credit quality. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt.