The strong issuance of yen corporate bonds shows that investors have good interest in bonds with shorter maturities and higher risk, given the uncertain prospects of how much the Bank of Japan will raise interest rates.
The strong issuance of yen corporate bonds shows that investors are more interested in bonds with shorter maturities and higher risk, given the uncertain prospects of how much the Bank of Japan will raise interest rates.
Japan's Sumitomo Chemical has registered to sell 150 billion yen (US$960 million) of bonds, including subordinated bonds. Outsiders speculate that the Bank of Japan may raise borrowing costs in the next few months. Earlier, the company announced operating losses of 489 billion yen for the fiscal year ending March 31.
The SoftBank Group, which has been rated junk by global rating agencies, said in a document on Monday that the company is planning to issue a huge amount of yen bonds to individual investors.
Masahiro Koide, co-head of Mizuho Securities's product business division, said, “The market environment has changed a lot in the past week.” He cited the Bank of Japan's unexpected reduction in bond purchase plans last week and the continued strengthening of the yen. Weakness has fueled speculation about interest rate hikes. “Demand is mainly focused on a period of less than five years.”
Lower rated bonds provide investors with additional income buffers, and they are often less affected by rising interest rates than higher-rated bonds. Strong demand for short-term notes also supported strong sales of yen bonds, as evidenced by recent deals between Indonesia and Berkshire Hathaway.
Financial companies with a credit rating of A, including KKR & Co. and Deutsche Bank, are also promoting Japanese yen notes because they are headquartered overseas, and yield premiums are often higher than their Japanese counterparts.
As 10-year Japanese bond yields approach the much-anticipated 1% mark, sales of Japanese corporate bonds have been active. The data shows that up to now, Japanese corporate issuers have issued 5.1 trillion yen of bonds in 2024, setting a record for the same period. This year, yen bonds issued by foreign issuers reached 1.4 trillion yen, the highest level since 2019.
Meanwhile, SoftBank issued 800 billion yen of three-year and five-year bonds on Tuesday after issuing seven-year bonds in January. According to the data, the coupon rate for 2029 bonds issued today is 1.189%, which is only slightly lower than 1.24% of the 2031 bonds issued in January.