Japanese credit default swap spreads tighten as liquidity returns

Japanese credit default swaps were generally tighter this week, as more participants came back to the market, putting an end to several weeks of illiquidity during the holiday season.

Confidence came back in Japan’s banking sector as US investment bank Goldman Sachs said it would invest ¥150 billion ($1.27 billion) in Sumitomo Mitsui Financial Group. The renewed confidence in Japanese banks was also reflected in the strong performance of bank stocks this week, with the Topix bank index gaining 8%, said one dealer.

While credit protection on the senior debt of stronger banks such as Sumitomo Mitsui Banking Corp or Bank of Tokyo Mitsubishi (BOTM) have remained stable

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