Japanese credit spreads continue to tighten after recent sell-off

“There was a lot more stability in offshore markets,” said one Tokyo dealer. Stronger US and European credit markets also fed some stability into the Japanese market.

These flows countered continued concern over bad loans on the country’s banks’ balance sheets, the earlier withdrawal of US funds from the Japanese market and its feared impact on the credit quality of Japanese companies and general risk aversion, which had caused many participants to use the credit default swap market to buy p

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