By Patricia Kuo Oct. 17 (Bloomberg) -- The cost of protecting Asia-Pacific bonds from default had the first weekly fall since Lehman Brothers Holdings Inc.'s bankruptcy, as central banks announced measures to revive stalled credit markets. The Markit iTraxx Japan index fell 8 basis points to 200.5 at 1:06 p.m. in Tokyo, according to prices from Barclays Capital. The benchmark of 50 investment-grade Japanese companies, which increases as investor perceptions of credit quality deteriorate, rose in each of the previous four weeks since Lehman filed for bankruptcy on Sept. 15. The benchmark ended last week at 223.3 basis points, according to CMA Datavision. ``The market is starting to believe that central banks' policy actions are taking out some of the financial systemic risk,'' said Craig Saalmann, a Sydney-based credit strategist with JPMorgan Chase & Co. ``People are still very afraid of volatility so I don't think they will be very aggressive for the rest of today because there is not enough certainty yet.'' U.S. stocks rose for the first day in three yesterday as oil's retreat below $70 a barrel sparked a rally on consumer companies and prospects of a government bailout for bond insurers reversed a slide in financial shares. Ambac Financial Group Inc. and other bond insurers are working on a plan that would enable them to sell troubled assets to the government, Chief Executive Officer Michael Callen said. Interbank Rates Fall Hong Kong's three-month interbank offered rate for local dollar loans fell 0.15 percentage point to 4.2 percent today, the biggest drop since Sept. 26. Singapore's U.S. dollar rate slid for a fourth day, the longest sequence of declines since May. The rate Australian banks charge each other for three-month loans fell to 5.66 percent from 6.20 percent a week ago. The three-month London interbank offered rate for dollars fell 5 basis points to 4.5 percent yesterday, the fourth consecutive drop and the longest sequence of declines since June. The spread on the Markit CDX North America Investment-Grade index of 125 companies in the U.S. and Canada fell 2 basis points to 198, according to broker Phoenix Partners Group. The Markit iTraxx Australia index declined 9.5 basis points to 218 at 2:53 p.m. in Sydney, compared with 265 on Oct. 10., Citigroup Inc data show. The benchmark is tied to the debt of 25 companies, including BHP Billiton Ltd. and Qantas Airways Ltd. Contracts on the senior debt of Macquarie Group Ltd. were last quoted at 320 basis points, according to Citigroup. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default. South Korean Sovereigns The Asia index of 50 investment-grade borrowers outside Japan was 5 basis points lower at 310, while the high-yield benchmark shed 25 basis points to 940 at 12:01 p.m. in Hong Kong, according to Morgan Stanley. The cost of default protection on South Korean sovereign debt fell 10 basis points to 360, ICAP Plc prices show. Swap prices on the Philippines rose to 400 basis points from 380 earlier today, according to ICAP. Credit-default swap indexes are benchmarks for protecting bonds against default, and traders use them to speculate on changes in credit quality. Credit-default swaps pay the buyer face value in exchange for the underlying securities or cash equivalent if a borrower fails to adhere to its debt agreements. To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.

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