Dealers settle Japan Airlines CDS

Yesterday’s dealer-held auction to determine the final price of credit default swaps referencing Japan Airlines returned a low value of 20 cents. The airline filed for bankruptcy in January.

14 dealers took part in the auction and produced an inside market midpoint of 18. Dealers set four point bid/offers, varying from 13/17 (Mitsubishi) to 18.5/22.5 (Credit Suisse).

The net open interest of physical settlement requests was just JPY300 million ($3.23 million) to sell, with BNP Paribas offering JPY 500 million and Merrill Lynch Japan bidding JPY200 million. No other physical settlement requests were forthcoming and Merrill filled its limit order at the final price.