Credit-default swap volumes tripled last week on electronics giant Fujitsu on the back of an upcoming convertible bond issuance. "Fujitsu's the highlight this week," said Ralph Orciuoli, head of credit trading at Bear Stearns in Tokyo. Traders noted that the spread on the five-year yen-denominated default swap blew out to 135-140bps last Tuesday from 85-95 basis points two weeks ago. The credit then settled around 99-103bps Thursday.
"It's going to be a big issue," noted a trader at Deutsche Bank in Tokyo, commenting on the impending JPY220-250 billion (USD1.7-1.9 billion) seven-year convertible. Approximately 15 trades, each USD10 million, were executed last week.
"Dealers have been pre-positioning themselves before the convertible hits the market," said one credit trader. He noted that dealers have been looking to put on positions on Fujitsu in anticipation of strong demand from convertible arbitrage hedge funds that will look to purchase credit protection on the back of stripping out the options on the convertibles.