By Oliver Biggadike Nov. 7 (Bloomberg) -- The cost of protecting Japanese and Australian corporate bonds from default increased before a U.S. labor report forecast to show employers cut jobs for the 10th straight month in October. Credit-default-swap indexes, which rise as perceptions of repayment ability deteriorate, climbed for a second day on concern a global recession is damaging company earnings. Contracts on Crown Ltd., Australia's biggest casino owner, led the rise in the nation's Markit iTraxx benchmark of 25 borrowers. ``Everything's turning sour again,'' said Michael Bush, head of credit research at National Australia Bank Ltd. in Melbourne. ``The market is pricing in a heavy global recession and arguably it's pricing in too much pessimism.'' The Markit iTraxx Japan index rose 21 basis points to trade at 251 as of 1:50 p.m. in Tokyo, according to Credit Suisse Group data. The benchmark of 50 investment-grade companies was little changed against last week's close of 257, CMA Datavision prices show. Citigroup Inc. quoted Australia's index of 25 borrowers 5 higher at 260, close to CMA's Oct. 31 level of 261. The U.S. economy probably lost another 200,000 jobs last month and the unemployment rate climbed to a five-year high of 6.3 percent, economists project today's non-farm payrolls report to show. U.S. same-store retail sales fell 0.9 percent in October from a year earlier, according to a report yesterday by the International Council of Shopping Centers. Crown Default Swaps Default protection costs on Australia's Crown soared after Las Vegas Sands Corp. said it's seeking funds to prevent debt default. Five-year credit-default swaps on Sydney-based Crown rose 85 basis points to trade at 490, according to Citigroup data. The price is equivalent to $490,000 annually to protect a $10 million investment in debt. Las Vegas Sands said in a regulatory filing yesterday that it probably won't meet the requirements of loans arranged by Citigroup, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. unless it cuts spending on developments, boosts earnings at its Las Vegas Strip casinos and raises more capital. Asia's benchmark for 50 investment-grade borrowers outside Japan, including the Thai government and Hong Kong's Hutchison Whampoa Ltd., was little changed at 360, Barclays Plc prices show. Contracts on the Philippine government climbed 10 to 400, according to BNP Paribas SA data. Credit-default swaps on the Markit CDX North America Investment Grade Index, linked to the bonds of 125 companies including MBIA, yesterday rose 11.75 basis points to 195.5 basis points, CMA data show. In London, the benchmark Markit iTraxx Europe index climbed 9 basis points to 141.5 basis points, according to JPMorgan Chase & Co. The indexes are benchmarks for protecting bonds against default and traders use them to speculate on changes in credit quality. Credit-default swaps are used to protect against or speculate on default. They pay the buyer face value in exchange for the underlying securities if a borrower fails to adhere to its debt agreements. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default. To contact the reporter on this story: Oliver Biggadike in Tokyo atobiggadike@bloomberg.net
Friday 7 November 2008
240,000 JOBS LOSSES ANNOUNCED.....? WOWEEEE
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