Prices for credit protection on Malaysia have fallen and volumes rocketed after Standard & Poor's upgraded the sovereign. Malaysian credit protection traded five to six times around the announcement on Tuesday, in comparison to a typical week where Malaysia trades about once a day. "Quite a number of trades went through," added a trader at Salomon Smith Barney.
Credit-default swap spreads tightened to 123-133 basis points from 130-140bps after S&P upgraded the sovereign to BBB plus from BBB. "A lot of local traders in Malaysia were bidding up the cash bonds," said one credit derivatives trader, adding that as the bonds moved out selling credit-default swap protection became more attractive than buying the bonds. The typical notional size of the trades was USD10 million.
