The number of companies with credit-default swaps referenced to them in Japan has expanded since the start of the year and is expected to grow further in the coming months as Japanese corporates relever their balance sheets.
In the past couple of weeks, traders have started quoting five-year protection prices on Resona Bank after it issued a EUR1 billion (USD1.3 billion) bond. Protection on the bank is trading at 37-42 basis points. Consumer finance giant Aiful Corp. has also started to trade in U.S. dollars for the first time after it issued a dollar-denominated bond earlier this month.
The credits have started trading in the default swap because the bond issues have been oversubscribed. In addition, now there are debt obligations on the names protection buyers can physically settle the swaps in the event of a default.
