Revived corporate bond deals in Japan underline need for funding
Fund managers are hunting for deals, especially as they look to put funds to work at the start of the financial year in April. PHOTO: AFP
TOKYO – Japanese corporate issuers are rekindling some shelved yen bond deals in a sign of pressing funding needs even as investors seek fatter premiums.
Suntory Holdings, one of a slew of firms that canceled or delayed deals in April due to sharp market fluctuations, is considering resuming the sale in May. Another beverage group, Asahi Group Holdings, sold yen bonds on April 25 in an offering that was postponed at the start of the month.
Companies paid about 60 basis points more than Japanese sovereign debt on average in April for new issuance, data compiled by Bloomberg showed. That is near the highest since June 2024, highlighting how it has become harder for borrowers and buyers to agree on prices. As well as the pulled deals, borrowers failed to sell out bonds in the usually stable local government debt market.
Premiums to sell new bonds have of course risen in global credit markets as well, but volatility is particularly tricky for Japan to navigate given that the market has been less exposed to extreme swings after years of rock-bottom interest rates. It matters right now because there is strong demand for funding from Japanese companies as the economy emerges from years of deflation.
'Many investors are demanding wider spreads as the environment is volatile and there's uncertainty,' said Mr Noritaka Oda, head of debt syndicate at SMBC Nikko Securities, adding that new issuance premiums may rise another five to 10 basis points in the next month or so.
Fund managers are hunting for deals, especially as they look to put funds to work at the start of the financial year in April. Issuers are also trying to pinpoint the best time to sell bonds before the Bank of Japan raises interest rates again, and to meet funding needs.
SoftBank Group leaned on its individual investor base to raise a record ¥600 billion (S$5.52 billion) from retail bonds earlier this month.
Several deals in the Asian dollar bond market were also delayed this month amid unpredictable markets, but those issuers have started to trickle back.
In Japan, corporate bond sales have almost doubled over the past decade to a record last fiscal year, raising the stakes in the once relatively calm market. The turmoil stemming from Donald Trump's tariffs is the first major shock since the pandemic, said Mr Masahiro Koide, joint head of the capital markets division at Mizuho Securities.
Issuers are testing how much extra they need to pay to attract investors, with average spreads climbing for a third month. They are up from 54 basis points in March, according to the data which includes financial issuance.
The widening premiums are more pronounced on some deals. Japan Tobacco sold ¥50 billion of five-year notes at a spread of 38 basis points earlier this month, while similarly rated Sony Group paid a premium of 24 basis points on that tenor in late February.
Suntory initially halted its hybrid bond offering because some investors were demanding over 20 basis points more than what it could agree to pay, Mr Yukihiro Iriyama, senior general manager at the finance department at the firm's corporate management and finance division, said in an interview with Bloomberg News.
Japanese credit investors are not entirely risk-averse, but are focusing on liquid deals from frequent issuers such as highway companies, said Mizuho's Mr Koide. BLOOMBERG
Join ST's Telegram channel and get the latest breaking news delivered to you.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
2 hours ago
- CNA
Apple faces AI, regulatory challenges as it woos software developers
CUPERTINO, California :Apple is facing an unprecedented set of technical and regulatory challenges as some of its key executives kicked off the company's annual software developer conference on Monday. On the technical side, many of the long-awaited artificial-intelligence features Apple promised at the same conference a year ago have been delayed until next year, even as rivals such as Alphabet's Google and Microsoft woo developers with a bevy of new AI features. Those unfulfilled promises included key improvements to Siri, its digital assistant. On the regulatory front, courts in the U.S. and Europe are poised to pull down the lucrative walls around Apple's App Store as even some of the company's former supporters question whether its fees are justified. Those challenges are coming to a head at the same time U.S. President Donald Trump has threatened 25 per cent tariffs on Apple's best-selling iPhone. Apple's shares are down more than 40 per cent since the start of the year, a sharper decline than Google and also lagging the AI-driven gains in Microsoft shares. Apple has already launched some of the AI features it promised last year, including a set of writing tools and image-generation tools, but it still relies on partners such as ChatGPT creator OpenAI for some of those capabilities. Bloomberg has reported that Apple may open up in-house AI models to developers this year. But analysts do not believe Apple yet has what technologists call a "multi-modal" model - that is, one capable of understanding imagery, audio and language at the same time - that could power a pair of smart glasses, a category that has become a runaway hit for Meta Platforms. Google said last month it would jump back into this category, with partners. Such glasses, which are far lighter and cheaper than Apple's Vision Pro headset, could become useful because they would understand what the user is looking at and could help answer questions about it. While Apple has focused on its $3,500 Vision Pro headset, Google and Meta have seized on the smart glasses as a cheaper way to deploy their AI software prowess against Apple in its stronghold of hardware. Meta Ray-Bans all sell for less than $400. Analysts say Apple needs to answer that challenge but that it is not likely to do so this week. "I'm not trying to replace my phone - this is a complementary thing that gives me more world context, because it's got a camera and it sees what I see, and I can talk to it in natural language," said Ben Bajarin, CEO of technology consultancy Creative Strategies. "Apple is not positioned to do that." To be sure, Apple's rivals are not decisively ahead in smart glasses. Anshel Sag, principal analyst with Moor Insights & Strategy, said Meta's Ray-Bans still lack some features and Google has not yet landed its "Gemini" model in a mass-market pair of glasses yet. "Meta has the undisputed lead, but Google is catching up fast and probably has the best-suited AI for the job," Sag said. "Vision Pro is great, but it's a showroom product that developers can use." But Bob O'Donnell, CEO of TECHnalysis Research, said it remains far from clear that smart glasses will gain wide acceptance. O'Donnell also said it is not certain that Apple is at any particular disadvantage if it partners with a company such as Google, OpenAI or even a smaller firm like Perplexity for core AI technology. So far, O'Donnell said, there is not yet strong evidence that consumers are basing major hardware-purchasing decisions on AI features.
Straits Times
3 hours ago
- Straits Times
US, China begin key trade talks in London
US Secretary of Treasury Scott Bessent and Chinese Vice-Premier He Lifeng shake hands as they pose for a photo during trade talks at the Lancaster House in London. PHOTO: AFP LONDON - China and the United States began a new round of trade talks in London on June 9, Beijing's state media reported, as the world's two biggest economies seek to shore up a shaky truce after bruising tit-for-tat tariffs. The two sides are meeting in the historic Lancaster House, run by the UK Foreign Office, following a first round of talks in Geneva in May. Chinese Vice-Premier He Lifeng was again heading the team in London. Chinese state news agency Xinhua reported the start of the talks. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are leading the US delegation, President Donald Trump said on June 6. 'The meeting should go very well,' Mr Trump said on his Truth Social platform. His press secretary, Karoline Leavitt, told Fox News on June 8: 'We want China and the United States to continue moving forward with the agreement that was struck in Geneva.' While the UK government reiterated that it was not involved in the discussions, a spokesperson said: 'We are a nation that champions free trade.' UK authorities 'have always been clear that a trade war is in nobody's interests, so we welcome these talks', the spokesperson added. Rare earths The talks in London come just a few days after Mr Trump and Chinese President Xi Jinping finally held their first publicly announced telephone talks since the Republican returned to the White House. Mr Trump said June 5's call reached a 'very positive conclusion'. Mr Xi was quoted by Xinhua as saying 'correcting the course of the big ship of Sino-US relations requires us to steer well and set the direction'. Tensions between the two nations have soared, with Mr Trump accusing Beijing of violating a tariff de-escalation deal reached in Geneva in mid-May. (From left to right) US Trade Representative Jamieson Greer, US Secretary of Commerce Howard Lutnick, US Secretary of Treasury Scott Bessent, Chinese Vice-Premier He Lifeng, Chinese Commerce Minister Wang Wentao, and Chinese International Trade Representative and Vice-Minister of Commerce Li Chenggang, posing for a photo at the Lancaster House on June 9. PHOTO: AFP 'We need China to comply with their side of the deal. And so that's what the trade team will be discussing tomorrow,' Ms Leavitt said on June 8. A key issue will be Beijing's shipments of rare earths – crucial to a range of goods including electric vehicle batteries and which have been a bone of contention for some time. 'Rare earth shipments from China to the US have slowed since President Trump's 'Liberation Day' tariffs in April,' said Ms Kathleen Brooks, research director at trading group XTB. 'The US wants these shipments to be reinstated, while China wants the US to rethink immigration curbs on students, restrictions on access to advanced technology including microchips, and to make it easier for Chinese tech providers to access US consumers,' she added. In April, Mr Trump introduced sweeping worldwide tariffs that targeted China most heavily. At one point, Washington hit Beijing with additional levies of 145 per cent on its goods, prompting China to respond with tariffs reaching 125 per cent on US goods. After two days of talks in Switzerland, both sides agreed to slash the eye-watering tariffs for 90 days, but key differences remain – especially over China's rare earth export restrictions. The impact was reflected in the latest official export data released on June 9 in Beijing. Exports to the United States fell 12.7 per cent in May from the previous month, with China shipping US$28.8 billion (S$37 billion) worth of goods. This was down from US$33 billion in April, according to Beijing's General Administration of Customs. 'Green channel' Throughout its talks with Washington, China has also launched discussions with other trading partners – including Japan and South Korea – to try to build a united front to counter Mr Trump's tariffs. On June 5, Beijing and Canada agreed to regularise their channels of communication after strained ties. Beijing has also proposed establishing a 'green channel' to ease exports of rare earths to the European Union, and fast-tracking approval of some export licenses. China is expected to host a summit with the EU in July, marking 50 years since Beijing and Brussels established diplomatic ties. According to a spokesperson for Mr Starmer, Britain's finance minister Rachel Reeves took advantage of the talks in London to meet with her US counterpart Scott Bessent and Chinese Vice-Premier He Lifeng on June 8. AFP Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
5 hours ago
- Business Times
US-China trade talks in London hang over markets
[LONDON] US-China trade talks in London held markets' attention on Monday (Jun 9), with Asian stocks rising, Wall Street mixed and Europe dipping. The London negotiations, following on from a first round in Geneva last month, aim to quell renewed tariff tensions between Washington and Beijing. New York's Dow and S&P 500 indices were lower, while the tech-heavy Nasdaq rose slightly in early trading. Asian shares closed up on hopes of a deal, and catching up with Wall Street from Friday, when US jobs data suggested the American economy was doing well, for now. The US dollar, however, was largely unmoved, with persistent fears of higher US inflation in the pipeline from Trump's generalised tariffs weighing on it. London, Paris and Frankfurt indices were all lower. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up While the US economy was showing resilience, official data on Monday showed China's exports to the US last month grew at a slower pace than expected, even as they picked up to the EU and Asia. The US-China talks took place following a call between US President Donald Trump and Chinese President Xi Jinping last Thursday. They sought a de-escalation after each had accused the other of violating terms of a tariffs reprieve struck in Geneva in mid-May. The US side in London on Monday was being led by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer, while Vice Premier He Lifeng headed the Chinese team. Their meeting was helped by news that Beijing on Saturday approved some applications for rare-earth exports, while US aviation giant Boeing is to start sending commercial jets to China for the first time since April. Easing China's export controls on rare-earths was key for Washington, 'while China wants the US to rethink immigration curbs on students, restrictions on access to advanced technology including microchips, and to make it easier for Chinese tech providers to access US consumers,' said Kathleen Brooks, research director at XTB. 'The outcome of these discussions will be crucial for market sentiment,' she said. The US dollar's weakness came as economists warned that Trump's tariffs on most of the world could reignite inflation, and as the US Federal Reserve weighs whether to lower interest rates. 'The May minutes and recent comments by several (policy board) members... suggest the Fed is highly attentive to the risk that tariffs will lead to a persistent inflation shock,' wrote analysts at Bank of America. In corporate news, entertainment giant Warner Bros Discovery announced plans to split into two publicly traded companies, sending its share price higher by more than 9 per cent. One would be a Streaming and Studios company covering film and TV production and catalogues, and the other a Global Network company with television brands including CNN and Discovery, and free-to-air channels in Europe. US semiconductor maker Qualcomm also announced it was buying a UK firm, Alphawave, for US$2.4 billion as demand for database infrastructure heated up from demand in the AI sector. Alphawave shares in London jumped more than 22 per cent on the news. Qualcomm's shares rose three per cent in New York. AFP
