Japan credit spreads veer away from global tightening trend
YEN corporate bond spreads reached a new high this week, diverging further from global credit and reflecting pressure on the Bank of Japan (BOJ) to normalise its ultra-easy monetary policy.
The premium investors are seeking on yen company debt rose to 63.3 basis points on Feb 1, the most since June 2020, a Bloomberg index shows. Japanese spreads have widened for the past five months, climbing ever-higher even after global corporate premiums started tightening in October.
Investors are becoming increasingly jittery with the nomination of a new BOJ chief looming in February, especially amid market speculation the central bank will further change its policy of capping 10-year sovereign yields in coming months after a shock move late last year.
“Market volatility caused by speculation over who will take on the BOJ governor job is creating a gap between Japanese corporate and global spreads,” said Kentaro Harada, chief credit analyst at SMBC Nikko Securities in Tokyo. “Japanese investors are hesitant to take on credit duration risks.”
Yen company bond spreads have increased from 54.9 basis points at the end of October, the figures show. In contrast, premiums on such debt globally have contracted to 133 basis points, from 181 basis points, according to the latest available data.
Japanese credit spreads edged higher this week even amid falling US bond yields after Federal Reserve chairman Jerome Powell said the disinflation process had started.
That means that yen borrowers are sticking with less-volatile shorter-tenor debt, reducing their options for getting longer-term funding. Issuers globally have been favouring shorter-maturity notes, but the shift is more pronounced in Japan. BLOOMBERG
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