Philippines' sovereign credit protection tightened in to record levels last week following strong interest globally in emerging-market credits and positive economic sentiment. "It's the tightest it's ever been," said a CDS trader at a European house in Hong Kong, adding, "We're reaching new tights every day." The five-year default-swap price has drawn in by about 30 basis points since the end of 2005, to around a 230-234 bid/offer late last week.
Dealers explained a flood of interest in emerging markets on the back of expected stabilization in U.S. rates (DW, 11/18), as well as strong domestic appetite for the credit have been driving the move. "It's all Philippines right now," said a senior credit official at a bulge bracket house, noting it is a top focus in the Asian CDS market. The sovereign credit was around 418bps mid-2005 and has been moving in steadily since then. "It's a huge move," added the CDS trader.
