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
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.
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.