Japan credit default swap spreads tighten despite falling stock market

Credit default swap spreads in Japan continued to tighten this week, despite the equity market benchmark Nikkei index closing down every day since Monday, ending at 8,516.07, 347.19 points or 4% down on the week.

"[Credit default swaps are] usually correlated to the stock market, but even though stocks have been falling, we haven’t seen customers come to buy protection,” said one dealer.

Traders in Tokyo said hedge funds, which are big buyers of credit default swaps, have been quiet on the market, keeping small positions as the year-end approaches. With more protection sellers than buyers on the other side, the cost of protection cheapened.

Another dealer said swap spreads continued to tighten due to

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