Asia corporate bond risk falls as Obama pledges spending

Asia corporate bond risk falls as Obama pledges spending

Hong Kong: The cost of protecting investors in Asia-Pacific bonds from default declined as US President-elect Barack Obama pledged the biggest public works programme in half a century.

The Markit iTraxx Japan index fell 3 basis points to 370 at 9.46am in Tokyo, according to prices from Credit Suisse Group AG. The benchmark of 50 investment-grade Japanese companies includes All Nippon Airways Co. Ltd and Japan Tobacco Inc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan slid 5 basis points to 425, according to BNP Paribas SA.

Obama said on 6 December he’ll make the single largest new investment in roads, bridges and public buildings since the Eisenhower administration to lift the sagging economy and create jobs. The announcement came a day after a government report showed employers in the US slashed 533,000 jobs last month, the biggest decline in 34 years.

Even though everything is going south, all these bailouts are designed to save the system and it keeps credit stable, said Brayan Lai, a credit analyst at Calyon—the corporate and investment banking arm of the group—in Hong Kong. Crédit Agricole

Governments worldwide have introduced measures to buttress their economies against the worst financial crisis since the Great Depression. India lowered interest rates over the weekend and announced it will spend an additional Rs200 billion ($4 billion) to boost its economy. China’s annual economic policy meeting will start on Monday, the Xinhua news agency said.

Obama said his plan to create or preserve 2.5 million jobs will also include making public buildings more energy efficient, repairing schools and modernizing health-care with electronic medical records. The US payrolls report was another painful reminder of the serious economic challenge our country is facing, he said.

The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. The benchmark is tied to the debt of 25 companies, including Qantas Airways Ltd and BHP Billiton Ltd.

The indexes are benchmarks for protecting bonds against default and traders use it to speculate on changes in credit quality. A decrease in price indicates improving perceptions of credit quality and an increase suggests deterioration.