Five-year credit default swap spreads on Sony widened to 20 basis points/30bps last week from 20bps/23bps three weeks ago, due in part to the company having to recall defective cell phones. Stephane Delacote, head of credit derivatives at BNP Paribas in Tokyo, said three and five-year protection traded and there was also "aggressive bidding" in the 10-year contract.
Sony was not the only electronics company on which credit protection spreads widened last week. Delacote added market makers were also buying protection on NEC and Toshiba. One credit trader in Tokyo said electronics companies were "trading too tight" and that traders are looking to buy protection as spreads should widen in the face of poor earnings in the electronic sector. The demand came mainly from investment banks buying protection but he added there was some interest from end-users in Japan. Standard & Poor's rates Sony A plus.
Spreads also blew out on Asian sovereigns last week on the back of concerns about Argentina and the other Latin American markets. Five-year credit protection on Malaysia moved to 175bps/185bps from 155bps/165bps. Philippine credit spreads on the most liquid contract, the three-year, blew out to 374bps/410bps from 345bps/390bps. Negative sentiment and a gloomy outlook by Moody's also led credit protection on Japan to increase a basis point in five and 10-year protection. Last week five-year protection moved to 16bps/19bps from 15bps/19bps.
Sony 5 Yr Mid-Prices
