TEPCO swaps – 1 year later

As highlighted in Bloomberg,

Tokyo Electric Power Co.’s credit- default swaps plunged to the lowest in a year after Japan’s government agreed to a 1 trillion yen ($12.5 billion) bailout for the owner of the stricken Fukushima nuclear plant.

The cost to insure the debt sold by the utility against non-payment declined 210 basis points in the past week to 436 basis points on May 14, the lowest since May 2011, according to data provider CMA. The contracts of Osaka, Japan-based Kansai Electric Power Co. climbed 34 to 288 in the period, double the increase in nation’s benchmark for bond risk and the gauge for North American companies, the data show.

The capital injection approved last week, Japan’s largest since the rescue of the banking industry in the 1990s, helped allay investor concerns that the cost of paying for the world’s worst nuclear disaster since Chernobyl in 1986 will bankrupt the utility known as Tepco. Moody’s Investors Service said earlier this week the infusion is a “positive first step in removing uncertainty for the industry.”……

The extra yield investors demand to own Tepco’s 1.795 percent notes due March 2017 fell 22 basis points in the past week to 534 on May 14, the lowest since October, according to data compiled by Bloomberg. The spread for Kansai Electric’s similar maturity 3.175 percent bonds widened to a record 46.8 basis points, the data show…….

The credit-default swaps of Kyushu Electric Power Co. jumped 35 basis points last week to 267 on May 11, while contracts of Chubu Electric Power Co. rose 33 to 214, according to CME Group Inc.’s CMA. No pricing data was available on the swaps of nuclear reactor operators Hokkaido Electric Power Co., Chugoku Electric Power Co. and Hokuriku Electric Power Co…….

Japan’s benchmark 10-year bond yield rose to 0.85 percent yesterday, after falling to 0.835 percent earlier in the day, the lowest level since October 2010. The notes yielded 94 basis points less than similar maturity U.S. Treasuries, compared with 201 basis points a year earlier.

Five-year credit-default swaps that protect Japan’s debt from nonpayment were at 104.3 basis points May 14, up from a seven-month low of 90.1 on March 27, according to CMA. The Markit iTraxx Japan index rose 9 basis points to 208, while the gauge for North American investment-grade companies climbed 6 to 115, according to the data…….

The spread on utility bonds over Japan’s sovereign debt has climbed one basis point this year to 44 basis points on May 14, according to an index compiled by Bank of America Merrill Lynch. The index excluded Tepco’s bonds on June 30 after Moody’s and Standard & Poor’s both cut their ratings on the utility to junk. That compares with a 4-point decline in the extra yield for Japanese company notes to 46 during the same period, and a 56- point drop in the gap for global corporate debt to 211, separate indexes show.

Japan is without atomic power for the first time since May 1970, after the country shut its last operating reactor earlier this month. Its utilities have been forced to turn to coal, oil and gas-fired plants to keep factories, offices and households supplied with electricity. The country’s nuclear reactors provided 30 percent of its electricity prior to March 11, 2011.

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