Mizuho Financial Group Inc. overtook Nomura Holdings Inc. as the No. 1 underwriter of corporate bonds in the first six months as yield premiums on corporate debt fell to their lowest level in eight years.
The nation’s third-largest bank by market value helped underwrite 25 percent of this year’s ¥4.16 trillion in note sales including offerings by Nissan Motor Co. and Mitsubishi Corp., according to data compiled by Bloomberg. Nomura, last year’s leader, fell to third place behind Mitsubishi UFJ Financial Group Inc.
Japanese investors are chasing higher spreads by buying longer-term bonds and those of overseas issuers as unprecedented Bank of Japan stimulus and concerns the economy’s rebound is stalling pushed down government debt yields. SoftBank Corp. was again the single biggest seller of notes during the period, providing underwriters with fees five times higher than the average paid by Toyota Motor Corp.
“There has been a big change in how investors take risk,” said Satoru Yamaguchi, a senior executive at Mizuho Securities Co., the group’s investment banking arm, in an interview at the company’s group headquarters in Tokyo on Tuesday. “As a result, you’re seeing overall a lengthening in maturities and a greater diversification of sellers as investors expand the scope of credits they’re willing to buy.”
The average spread on Japanese corporate bonds fell to 22 basis points last month, the lowest level since 2007, while the yield on the notes dropped to an 11-year low of 0.381 percent, Bank of America Merrill Lynch indexes show. Yen-denominated Samurai debt sold by overseas issuers in Japan offered a yield premium of 40, while corporate notes globally paid 107.
Japan’s benchmark 10-year government bond yield has dropped 17½ basis points, or 0.175 percentage point, this year to 0.56 percent, the lowest level in the world. It fell 1½ basis points Tuesday, as a BOJ survey showed that sentiment among large manufacturers worsened in the second quarter.
“Spreads on domestic bonds are already pretty tight, so there isn’t much room for them to narrow further, with a few exceptions,” said Tadashi Matsukawa, head of fixed-income investment at PineBridge Investments Japan Co. “There is no sign of benchmark yields rising as the economy worsens.”
While corporate offerings in the first half dropped 18 percent from a year earlier, they were larger than for the same period in 2012 and 2011, Bloomberg-compiled data show. Issuers brought forward sales in second quarter of last year after BOJ Gov. Haruhiko Kuroda unveiled plans to double the country’s monetary base in about two years to defeat deflation.
Mitsubishi Corp., Japan’s biggest trading company, sold ¥40 billion of 18-year debentures on June 20, its longest bond in 15 years. The weighted-average maturity for Japanese corporate bonds this year has risen to seven years, compared with 6.3 years and 6.5 in 2013 and 2012, respectively.
“Unless the market conditions are favorable, it is difficult to get investors interested in bonds of ordinary companies that are longer than 10 years,” Masanori Azuma, the head of debt capital markets department at Nomura Securities Co., said in an interview in Tokyo. “We’re beginning to see issuers become more forthcoming in raising funds.”
Japanese companies are increasing their investment plans more than forecast even as a sales tax hike in April dents sentiment. Large firms across all industries plan to boost capital spending 7.4 percent this fiscal year through March, more than a 0.1 percent increase they signaled three months earlier, a BOJ report showed Tuesday.
Billionaire Masayoshi Son’s SoftBank, which paid $22 billion for Sprint Corp. last year, raised ¥300 billion in a bond sale in May that cost 1.25 percent in fees as offerings to individual investors boosted expenses. That compares with 0.244 percent paid by Toyota this year.
Mizuho also helped underwrite 18 percent of this year’s ¥1.53 trillion in Samurai sales in the first half, the busiest six-month period since 2008, Bloomberg data show. That put it in third place behind Mitsubishi UFJ and Daiwa Securities Group Inc., while Nomura ranked fifth.
The group holding company Tuesday was marketing 10-year subordinated notes at a spread of 39 to 44 basis points over government debt, according to a person familiar with the matter, who asked not to be identified because the terms aren’t settled.
This would be the second yen bond sale by a Japanese bank to comply with tougher new Basel III financial regulations that enable authorities to force a writedown should the issuer be at risk of becoming bankrupt. A similar security sold by Mitsubishi UFJ last month was oversubscribed by about three times, as the subordinated notes offered almost four times the spread on senior notes from the group’s main bank.
“Globally, there is a huge volume of money being poured into debt markets” by central banks in the form of quantitative easing, said Mizuho’s Yamaguchi. “What is happening in the Japanese corporate market, the same sort of thing is occurring around the world.”