Yen Swap Spreads Near Record as Hedge Funds Stay Away, RBS Says

Bloomberg – Japan’s attempts to end financial turmoil failed to lure hedge funds back to its swap markets, leaving premiums paid by domestic borrowers near a record, RBS Securities Japan Ltd. said.

Hedge funds, which lost more than $400 billion through withdrawals and market losses since June, pulled out of Japan’s swap markets after the failure of Lehman Brothers Holdings Inc. led to a seizure in global credit, said Tatsuo Ichikawa, a senior strategist at RBS in Tokyo. Japan’s banks were charged record premiums this month to swap London borrowing rates for those set in Tokyo as a slumping economy exacerbated concern about the health of the nation’s companies.

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