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Samurai bond sales at fastest pace since global financial crisis


SAMURAI bond issuance is running at the quickest pace since the global financial crisis as higher US dollar yields and a four-year low for swapping yen to US dollars draws overseas borrowers.

National Australia Bank Ltd (NAB) on Thursday sold 104.9 billion yen (S$1.3 billion) of yen bonds, bringing total issuance of Samurai notes since April 1 to 1.04 trillion yen, the highest for the same period since 2008, according to Bloomberg data.

Japanese investors are welcoming the attention as the Bank of Japan keeps the yield on local 10-year government debt near zero.

Overseas banks have been particularly eager to tap the yen market to boost their regulatory capital, according to Manulife Asset Management. With emerging markets remaining volatile, highly-rated issuers such as NAB have seen strong demand for their deals. NAB and Westpac Banking Corp, which sold at the end of June, have ratings higher than the Japanese government.

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"The Japanese economy is awash with cash, and many overseas issuers are coming here to access it," said Shunsuke Oshida, senior credit analyst at Manulife Asset. Yen debt sales by foreign banks are likely to increase further because lenders "are under growing pressure to add to their capital to meet regulatory requirements, and they want to diversify their funding sources in doing so," he added.

Samurai sales so far this year are on the verge of topping last year's full-year total of about 1.1 trillion yen, according to data compiled by Bloomberg, in a dramatic reversal of issuance. By contrast, US dollar bonds from Asia-ex Japan issuers are down about 33 per cent since April 1, Bloomberg bond league tables show.

Five-year basis swaps show that overseas borrowers in yen wishing to swap back funds into US dollars had to pay a premium of about 41 basis points on Thursday, the lowest since August 2014, according to data compiled by Bloomberg.

"From investors' standpoint, this is positive in two ways: Samurai bonds pay higher yields than domestic debt, and they're useful for portfolio diversification," according to Manulife's Mr Oshida. BLOOMBERG

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