By Katrina Nicholas and Yusuke Miyazawa April 5 (Bloomberg) -- The cost of protecting corporate and sovereign bonds from non-payment fell in Asia and Japan, according to traders of credit-default swaps. The Markit iTraxx Japan index dropped 5 basis points to 91 basis points as of 9:44 a.m. in Tokyo, according to Morgan Stanley. A close of 91 basis points would be the lowest since June 6, 2008, according to prices from CMA DataVision in New York. “This drop is not temporary,” said Yasuhiro Matsumoto, a senior credit analyst at Shinsei Securities Co. in Tokyo. “The U.S. employment report was better than expected, and stocks have been rebounding in developed economies, showing fundamentals are recovering. The index can go down to 80 basis points for now.” The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2 basis points to 94.5 basis points of 8:36 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. Markets in Australia were closed for the Easter Monday public holiday. The Markit iTraxx Australia index closed little changed at 85.5 basis points in Sydney on April 2 according to CMA DataVision. A basis point is 0.01 percentage point. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. An increase suggests deteriorating perceptions of creditworthiness and a drop shows improvement. The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net; Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

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