As SoftBank Bond Risk Jumps, Nomura Says Hard to Call an End

  • Collapsed Sprint, T-Mobile US talks fueling uncertainty
  • Softbank CDS has increased to the highest since last November

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Bond risk at SoftBank Group Corp. has jumped to a one-year high, as concerns mount in the wake of collapsed talks between unit Sprint Corp. and T-Mobile US Inc.

It’s hard to tell where it will stop, as the let-down from the failed deal takes time for the market to digest, according to Nomura Holdings Inc.

SoftBank’s five-year credit-default swaps traded around 170 basis points Thursday, say CDS dealers. That’s the highest since Nov. 29 last year, and up from 169.1 Wednesday, according to CMA data. It’s set for a sixth straight day of increases, the longest rising streak in more than two months.

The following reasons make it difficult to forecast how high the CDS may go, according to Nomura’s chief credit strategist Toshihiro Uomoto:

  • There were high hopes in the market for a deal between Sprint and T-Mobile before the talks fell apart, and it’s unclear how long it would take the market to correct itself.
  • Growth momentum of the mobile communication industry is weakening in both the U.S. and Japan.
  • A tug of war is under way between optimism -- such as that SoftBank will ultimately benefit from retaining full control on Sprint --- and caution.
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