Japan\\\'s samurai bond issuance on track to set record this year

FE Team | Published: July 16, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

TOKYO, July 15 (Reuters): Japan's samurai bond market is on track for a record year, as low issuance costs and yield-starved Japanese investors tempt more foreign companies to issue yen-denominated debt.
The popularity of samurais might seem counterintuitive, as spreads are far tighter now than in the heyday of such bonds before the 2008 financial crisis dried up the market.
But as yields on other types of fixed-income bonds and instruments in Japan are even lower, there's growing investor demand for samurai bonds - at the same time that it has become more cost effective for foreign firms to issue them.
Samurai issuance in the January-June period came to 1.5299 trillion yen ($15.08 billion), according to Thomson Reuters data, the highest amount in six years and just shy of 2013's full-year total of 1.636 trillion yen.
More deals are in the works, so 2014 issuance is poised to overtake 2008's record of 2.307 trillion yen, bankers here say.
Corporate debt-issuance by Japanese firms fell to about 4.33 trillion yen in the first half of this year from 5.27 trillion in the first half of 2013, according to data from Thomson Reuters. At the same time, the Bank of Japan (BOJ) is soaking up liquidity in the government bond market under its massive monetary easing programme, narrowing the options for domestic bond investors.
"Even though the spreads have narrowed, there's still good demand for credit products from regional banks, pension funds, insurers - everybody who wants fixed returns and relatively low risks," said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments in Tokyo.
Hongkong and Shanghai Banking Corp, a wholly-owned subsidiary of HSBC Holdings, sold a 5-year fixed-rate 75 billion yen samurai bond last month at a record-low coupon with the tightest spread in at least 14 years.
Still, the yield at 1 basis point over yen offer-side swaps, or 0.345 per cent, was still well above where 5-year Japanese government bond stood at 0.155 per cent on Monday.
The BOJ's massive asset-purchase program has kept a tight lid on Japanese government bond yields, and the low global interest rate environment has added even more pressure. Last week, Japan's benchmark 10-year bond yield fell to a 15-month low of 0.530 per cent.
"Japanese investors have money, but there's not much corporate supply here, so they have to think about buying samurai bonds," said Kenichi Kanda, head of international debt origination at Daiwa Securities in Tokyo.