Japan's $100B Bond Boom Is Just Beginning -- Wall Street Can't Get Enough
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Behind the scenes, there's a major shift unfolding. Japan's once-stable debt market is no longer a sure thing. Traders are pricing in more government spending, pushing yields higher and making yen-based debt less appealingboth for issuers and investors. Case in point: a seven-year, single-A yen bond now yields around 1.6%, up from near-zero in 2021. And with 13.2 trillion ($89 billion) in bonds maturing by 2026, non-financial Japanese corporates are facing a refinancing wall. Bloomberg Intelligence credit analyst Sharon Chen points out that sectors like utilities, telecom, and transport are especially likely to go offshore, where the euro and dollar markets offer longer tenors and tighter spreads.
For global investors, this could be just the beginning. Japan still makes up a tiny slice of global bond indexesjust 2% in the dollar high-grade market and 1.6% in Europe. That's part of the appeal. Portfolio managers are hungry for new names and fresh diversification plays. And with syndicate desks flush with cash and demand running hot, issuers are striking while the window's wide open. As JPMorgan's Andreas Michalitsianos put it: Supply only comes when there's demand. Right now, that demand is roaring.
This article first appeared on GuruFocus.
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