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Japan-Update

Japanese companies hold off on floating bonds

Paltry yields sap corporate debt's appeal amid North Korean tensions

TOKYO -- Major Japanese enterprises including the NTT group and Ricoh have decided to postpone bond issuances, gauging the yields they are willing to offer as too low for investors amid a flight to safety.

NTT Finance, which handles fund procurement for parent company Nippon Telegraph & Telephone and group members, intended to float 30 billion yen to 50 billion yen ($270 million to $450 million) in debt. Ricoh planned to issue roughly 20 billion yen in bonds, while Nippon Steel & Sumitomo Metal considered raising up to 50 billion yen. All have opted not to go ahead, at least in September.

The decisions came as yields on Japanese government bonds fell sharply this month amid growing geopolitical tensions over the Korean Peninsula. Investors snapped up this debt, regarded as a safe-haven asset, sending yields on newly issued 10-year JGBs down to minus 0.015% on Sept. 8 -- the lowest level since November. As of Thursday, the yield still languished at 0.04%.

The resulting environment means that companies must offer hefty premiums over JGB yields to make their debt palatable to investors. But many businesses balk at doing so, since the interest premium is regarded as an indicator of creditworthiness. And many are sitting on large cash reserves and have no pressing need to issue bonds -- another apparent reason for the postponements.

(Nikkei)

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