Japanese credit default swaps market turns defensive

Japan’s credit default swaps market continued to ignore the threat of war in Iraq, diplomatic tensions with North Korea and weak stock markets, but the mood in Tokyo was nevertheless bearish, and market participants were more keen to buy protection than sell protection ahead of the weekend.

“The rest of Asia was wider on North Korea, but Japan has brushed most of that off,” said one dealer, although he questioned how long Japan’s stance could last. Dealers in Tokyo said that credit default swaps have widened a little this week, but most spreads had come back in by the end of the week.

With market uncertainty still dominating globally and the Japanese fiscal year-end approaching on March 31, participants are taking a cautious approach, and most are staying on the sidelines, waiting