Japanese bond yields soar, driving short-term financing as companies rush to issue bonds to lock in low costs
Japanese bond yields have soared, attracting multiple companies to return to the market to issue bonds. At least 10 issuing institutions, including Kirin Holdings and Suntory Beverage & Food Limited, issued over 530 billion yen in bonds in a single trading day, mainly with maturities of 10 years or shorter. Due to accelerating inflation and market expectations for interest rate hikes, companies hope to lock in low-cost financing before the markets in the United States and the United Kingdom close
The Zhitong Finance APP noted that this week, Japanese bond yields soared, but borrowers saw hope in it, as higher interest rates attracted credit investors.
At least 10 issuers, including beverage producers Kirin Holdings, Suntory Holdings, real estate company Mitsui Fudosan, and the Republic of Indonesia, rushed into the market on Friday. They issued bonds totaling over 530 billion yen (approximately 3.7 billion USD) on one of the busiest trading days of the year, with maturities mainly of 10 years or shorter.
This week, Japanese bond yields (especially the yields on the longest-term bonds) rose significantly, making bond issuance more attractive to investors, leading to a series of bond trades. After some borrowers postponed or canceled planned trades in April due to U.S. tariffs shaking the market, they are now returning to the market.
Dai Otsu, head of the bond syndicate at Daiwa Securities, stated, "Japan's ultra-long-term rates are attracting global attention. For investors, even short-term bonds can provide decent yields, while issuers prefer to raise shorter-term funds at lower costs rather than locking in higher long-term rates."
Data from Friday showed that due to rising food and energy costs, Japan's inflation accelerated to its fastest level in over two years, which also kept the possibility of the Bank of Japan raising interest rates alive, further encouraging issuers to issue bonds to guard against further increases in short-term bond yields.
Kit Lowe, senior fixed income analyst at InTouch Capital Markets, stated, "Some Japanese companies may be concerned about the Bank of Japan potentially raising interest rates soon." Additionally, "Japanese companies want to issue bonds before the U.S. and U.K. markets close on Monday."
As Japanese sovereign bond yields (including 30-year and 40-year bond yields) hit record highs, bond issuance surged. The benchmark 10-year government bond yield is just a few basis points away from its highest level since 2008.
In the credit market, issuance channels are filling up. Fujifilm Holdings hired banks on Friday to issue 100 billion yen in three tranches as early as June.
Dai Otsu from Daiwa Securities stated, "This favorable environment is expected to continue. Many companies face upcoming redemptions and need funds, while the market is stabilizing and investor demand remains strong." Daiwa Securities is one of the largest underwriters of corporate bonds in Japan
