Japanese credit default swaps trading centres around convertibles

Most of the trading in Japan’s credit default swaps market centred around names with outstanding convertible bonds in quiet trading this week.

The cost of credit protection on computer maker Fujitsu’s five-year debt narrowed 5 basis points to 125bp this week, while computer maker NEC saw the cost of protection on its debt fall to 86bp from 90bp last Friday. The pair have some of the largest convertible bonds oustanding in the market.

The overall market remained subdued. “We’ve gotten to such tight spread levels that there have been few bids [for credit protection],” said one trader. Some market participants who believe spreads will widen in the near future were taking buy positions, but they were in a minority, according to other traders.

"There are still quite a few offers overall on the market," said the trader, who added that investors are still keen to offer credit protection to enhance returns.

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