Borrowers are finding a silver lining in this week’s surge in Japanese bond yields with higher rates attracting credit investors.
At least 10 issuers including drinks producers Kirin Holdings and Suntory Holdings, as well as real estate company Mitsui Fudosan and the Republic of Indonesia rushed to the market Friday.
They priced more than JPY530 billion ($4.76 billion) of bonds in total, with maturities of mainly 10 years or less, in one of the busiest days this year.
The string of bond deals came after Japanese bond yields, especially for the longest tenors, moved sharply higher this week and made the offerings more attractive to investors.
Some of the borrowers are returning to the market after delaying or cancelling their planned deals in April as US tariffs rocked markets.
“Japan’s ultra-long interest rates are attracting global attention,” said Dai Otsu, head of debt syndication at Daiwa Securities. “For investors, even short-term bonds offer decent yields, and issuers prefer to raise funds at lower cost with shorter maturities rather than lock in high long-term rates.”
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Data Friday showing that inflation in Japan accelerated at the fastest clip in more than two years on rising food and energy costs are also keeping Bank of Japan rate hikes in play, adding to the incentive for issuers in case yields on shorter-tenor notes rise further.
“Some Japanese corporate names might be worried about potential near-term BOJ rate hikes,” said Kit Lowe, a senior fixed income analyst at InTouch Capital Markets. In addition, “Japanese names are looking to get ahead of market holidays on the US and UK on Monday”.
See also: Japan’s stocks decline in wake of wild US pre-tariff volatility
The spurt of issuance comes as Japanese sovereign bond yields, including those on 30- and 40-year debt, reached records. The benchmark 10-year yield is also just a few basis points short of its highest since 2008.
In the credit market, the pipeline is filling up. Fujifilm Holdings hired banks Friday for a potential JPY100 billion three-tranche deal as early as June.
“This favourable environment is expected to continue,” said Otsu at Daiwa Securities, one of the biggest underwriters of Japanese corporate bonds. “Many companies face upcoming redemptions and need funding, while the market is stabilising and investor demand remains strong,” he said.
Chart: Bloomberg
