Protection on Sumitomo’s 10-year subordinated debt is currently quoted around 250 basis points, compared with about 215bp a week ago. One dealer noted: “There are more and more protection buyers on the sub-debt.”
As a result, the spread of Sumitomo’s 10-year sub-debt credit default swap is likely to continue to rise in coming days. The dealer believed Sumitomo’s task will be challenging, especially given the large amount of funds it is seeking to raise and current negative sentiment from international investors towards Japanese banks.
The electronics sector also saw some active trading this week, although spreads remained within a tight range – finishing the week about 3bp wider than where they were last week, said another trader. Five-year protection on Fujitsu was quoted at 90bp and Toshiba at 92bp.
Dealers noted that the Fifa World Cup, being co-hosted by Japan, again kept trading activities subdued. Friday afternoon in Tokyo was especially quiet as traders turned their attention to the Japan versus Tunisia game, which would determine whether Japan would make it past the first round.