March 17 (Bloomberg) -- Markit Group Ltd., the London-based provider of bond and derivatives indexes, plans to create a benchmark for credit-default swaps on Asia-Pacific governments,
according to six traders familiar with the matter.
The Markit iTraxx SovX Asia Index may track swaps on the debt of China, Malaysia, Thailand, South Korea, Vietnam, the Philippines, Indonesia, Japan, Australia and New Zealand, said
four of the traders, who asked not to be named because the
proposal is private.
Curbs on credit swaps linked to sovereign debt are being discussed by European finance ministers after Greek Prime Minister George Papandreou blamed traders for worsening his
nation’s debt crisis. The U.S. Congress is seeking to regulate
the derivatives after they contributed to the global financial
crisis.
“We always have a number of new indices under consideration” and “we will update the market as and when appropriate,” said Caroline Lumley, a spokeswoman for Markit in
London.
Credit-default swaps are used to speculate on the creditworthiness of a company or government, or to hedge against losses on bonds and loans, and let buyers demand payment from
sellers if the underlying borrower fails to make scheduled
interest or principal payments. Prices rise as perceptions of
creditworthiness deteriorate.
Markit’s Asia-Pacific sovereign index may start trading within a month, according to the four traders.
New Indices
Swaps on Greece fell 3 basis points to 291 basis points in London after rising to as much as 428.25 basis points on Feb. 4, according to CMA DataVision prices. Contracts on the Markit
iTraxx SovX Western Europe Index of 15 governments, including
Greece, fell 0.5 basis point to 67, CMA prices show.
Claims that default swaps are responsible for a jump in government borrowing costs are “flawed and inconsistent,” the International Swaps and Derivatives Association said in a
statement March 15. Donna Chan, a spokeswoman for ISDA in
Singapore, declined to comment on the creation of new indexes.
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