Five-year credit-default swap spreads on Singapore Telecommunications widened to 75-90 basis points from 60-75bps after a negative ratings outlook. "In terms of absolute spread for Asian names, it's a big move," said Bill Xie, credit derivatives trader at BNP Paribas in Hong Kong. Last Monday Moody's Investors Service put SingTel on negative outlook due to such factors as ongoing expenditures, including additional investments in Indonesia's Telkomsel that may hinder its ability to pay down its debt.
"This is a sign for bad news to come," said one dealer, noting that it is possible that SingTel may struggle to meet debt reduction targets and could be downgraded in the near future. "SingTel's been one of the only active names," added another dealer, noting that credit derivatives volumes in Asia have plummeted during the soccer World Cup. One trader joked, "We've been busier market making for the World Cup than for Asian default swaps."
