Asia-Pacific Corporate Bond Risk Increases, Default Swaps Show

The risk of Asia-Pacific companies defaulting on their debt increased as Morgan Stanley and other securities firms reported losses linked to subprime securities.

Credit-default swaps in Asia excluding Japan rose the most since the current index started trading on Sept. 20 on concern losses on securities tied to the U.S. housing market will keep increasing. Morgan Stanley, the second-biggest U.S. securities firm, said its subprime mortgages and related securities lost $3.7 billion in the past two months.

``The effect has been imported from overseas with more bad news regarding subprime, which has caused the spread to widen,'' said Peggy Furusaka, sector specialist at BNP Paribas in Tokyo. Asian companies are worried about their ``exposure to subprime with the negative news flowing from the U.S.,'' she said.

Credit-default swaps on the iTraxx Asia Ex-Japan Series 8 Index of 70 borrowers, including the Thai government and Mumbai- based Tata Motors Ltd., increased 11 basis points to 128.5 basis points as of 1:56 p.m. in Tokyo, according to prices from JPMorgan Chase & Co.

The iTraxx Australia Series 8 Index of 25 companies, including Qantas Airways Ltd. and Macquarie Bank Ltd., rose 1.5 basis points to 46.5 basis points, JPMorgan prices show.

ACA Capital Holdings Inc., a seller of default protection on securities linked to mortgages and other debt, yesterday reported the largest writedown in the financial guarantee industry this year.
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