May 27, 2017 3:59 am JST

Strong first quarter points to record year for Japan corporate bond sales

Sense that interest rates aren't going any lower drives rush to borrow

Japanese medium- and long-term bond yields have been hugging zero. Here, mostly municipal and agency debt yields are shown.

TOKYO -- The value of Japanese corporate bond offerings in fiscal 2017 is on pace to surpass the all-time high hit last fiscal year as companies move to lock in ultralow interest rates before they turn higher.

Issuances are expected to far exceed 2 trillion yen ($17.9 billion) in the April-June quarter.

NEC will issue around 100 billion yen worth of bonds as early as June, it was learned Friday. Its last offering was over a year ago. In the year ending March 2018, the company has plans to repay around 60 billion yen of interest-bearing debt, including roughly 40 billion yen of bonds. With around 80 billion yen of debt payments due next fiscal year, NEC seeks to take advantage of current low borrowing costs.

Last fiscal year, Japanese corporate bond floats swelled to a record of more than 11 trillion yen. "There's now a possibility of exceeding fiscal 2016, which we hadn't anticipated at the start of the year," according to a leading securities firm.

In September, the Bank of Japan adopted a long-term interest rate target of around zero, creating resistance against government bond yields sinking deep into negative territory. Looking further ahead, corporate bond market watchers see a greater chance of interest rates rising than of them falling.

Toyota Motor decided Friday to issue 100 billion yen of corporate bonds. Herbal drugmaker Tsumura & Co. will issue bonds for the first time, aiming to raise 30 billion yen.

As of Friday, corporate bond issuances decided in the April-June quarter totaled 1.82 trillion yen. Offerings not yet finalized from companies such as beverage maker Asahi Group Holdings and e-commerce group Rakuten are expected to exceed 600 billion yen, pushing the total above 2 trillion yen.

Roughly 10 trillion yen worth of corporate bonds are scheduled to mature this fiscal year, mainly five- and 10-year debt, according to SMBC Nikko Securities. With interest rates significantly lower than they were five or 10 years ago, market watchers had been expecting a rush to refinance.

But the difference this fiscal year is that there are also "increases in forward-looking fund-raisings for such activities as growth investments," says Hajime Suwa, head of debt capital markets at Mitsubishi UFJ Morgan Stanley Securities.

Tire maker Bridgestone, which raised 150 billion yen in a bond sale in April, said it will use the money for acquisitions as well as capital investments in large tires, for which it reports strong U.S. demand. Shipper Nippon Yusen, which decided to issue corporate bonds for the first time in nearly four years, plans to invest the 30 billion yen in proceeds in bulk shipping.

(Nikkei)

NEC Corp.

Japan

Market(Ticker): TKS(6701)
Sector:
Industry:
Electronic Technology
Electronic Equipment/Instruments
Market cap(USD): 6,792.31M
Shares: 2,604.73M

Toyota Motor Corp.

Japan

Market(Ticker): TKS(7203)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 171,937M
Shares: 3,263M

Tsumura & Co.

Japan

Market(Ticker): TKS(4540)
Sector:
Industry:
Health Technology
Pharmaceuticals: Other
Market cap(USD): 2,905.07M
Shares: 70.77M

Asahi Group Holdings Ltd.

Japan

Market(Ticker): TKS(2502)
Sector:
Industry:
Consumer Non-Durables
Beverages: Alcoholic
Market cap(USD): 18,615.5M
Shares: 483.58M

Rakuten, Inc.

Japan

Market(Ticker): TKS(4755)
Sector:
Industry:
Consumer Services
Other Consumer Services
Market cap(USD): 17,420.1M
Shares: 1,433.44M

Bridgestone Corp.

Japan

Market(Ticker): TKS(5108)
Sector:
Industry:
Consumer Durables
Automotive Aftermarket
Market cap(USD): 35,796.7M
Shares: 813.10M

Nippon Yusen KK

Japan

Market(Ticker): TKS(9101)
Sector:
Industry:
Transportation
Marine Shipping
Market cap(USD): 3,073.56M
Shares: 1,700.55M

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