Euroyen placements pick up
Bonds Global issuers drawn to long tenors in Japanese marketBY TAKAHIRO OKAMOTOThe yen bond market is drawing
the attention of global issuers
ranging from GOLDMAN SACHS to
German chemical firm BASF as
Japanese investors look for long-
dated assets.
While the Samurai market
has seen just one deal from the
REPUBLIC OF THE PHILIPPINES so far
this month, several well-known
borrowers have tapped the
euroyen market, both in public
and private placements.
The most recent sign that
the yen market is delivering
competitive funding came
from Goldman Sachs, which
sold a ¥40bn (US$361m) 5.25-
year public euroyen offering
on August 10, its first yen
benchmark since 2012.
Goldman’s deal came shortly
after BASF raised ¥10bn through
a 1.025% 30-year bond, its first inthe yen market, led by Morgan
Stanley.
“The attractive long-
term funding at favourable
conditions as well as investor
diversification led BASF to
issue yen bonds at this time,” a
spokesperson for BASF told IFR.
Bankers say the Japanese
market has become more
competitive, especially at the
long end, primarily due to the
recent secondary widening in
euros, helping open the door
for foreign issuers to the yen
market.
The iTraxx Europe five-year
CDS index, a leading indicator
of the trend in European credits,
has been on the widening trend
since early February, moving out
from 43.8bp on February 1 to
75.7bp on June 28 before pulling
back to the 69bp area last week.
DANSKE BANK also tapped the
long end of the curve with a¥10bn 20-year bond.
“As the trade met our target
in euro terms (swapped to
the three-month Euribor),
it fitted the bill,” said Steen
Alva-Jørgensen, chief funding
manager at Danske.
Notably, the Danish bank
chose to issue through a private
placement even though it has a
programme on the Tokyo Pro-
bond market and thus could
have issued to a wider audience.
“We prefer using our
multicurrency standard
documentation, our EMTN
programme, and the investor
did not request a Pro-Bond
and was happy with EMTN
documentation,” said Alva-
Jørgensen explaining the reason
not to use the Pro-Bond format.
It is also the first senior
non-preferred yen bond from
Denmark.
“We were approached by JPMorgan , who suggested an NPS
issue in yen under our EMTN
programme,” Alva-Jørgensen
said.
The Danske trade is the
latest in a wave of SNP deals
from Nordic banks in various
currencies, according to a
banker at a European house in
Tokyo.
NORDEA , which has been
absent from the yen market
since it issued Samurai bonds
in 2015, also returned to Japan
earlier this month with a ¥5.5bn
seven-year euroyen.
STANDARD CHARTERED tapped the
euroyen market to issue ¥10bn
of 11-year non-call 10-year
bonds which bankers expect to
count towards its loss-absorbing
capital requirements.
These private placements
were made possible by specific
needs on the investor side as
well, such as demand for longer
tenors not usually seen in public
deals, bankers said.
“Although Japanese investors
could buy these credits at public
deals in dollars or euros, whichING joins Aussie covered ranks
Bonds Scarcity value underpins Australian market’s latest covered debutBY JOHN WEAVERSING BANK (AUSTRALIA) revived the
country’s flagging domestic
covered bond market with a
well-received A$1bn (US$725m)
dual-tranche three and five-year
debut that can only encourage
further issuance.
The A$400m three-year
floating-rate tranche priced
inside 60bp area guidance at
three-month BBSW plus 58bp.
The A$600m 3.0% five-year
piece priced at 99.803 for a yield
of 3.0425%, below 80bp area
guidance at asset swaps plus
77bp.
ING Australia is the sixth
Australian bank and only the
second non-major lender to issue
local currency covered bonds,
which offer a tightly priced
alternative to the far larger
senior unsecured and RMBS
markets.“Covered bonds provide
another option to diversify our
funding base, particularly for
longer tenors, as we look for
future opportunities to issue
covered bonds beyond five
years,” said Peter Casey, deputy
treasurer at ING Bank (Australia).
ING and NAB were co-arrangers
and joint bookrunners with
DBS Bank , Deutsche Bank and RBC
Capital Markets for last Friday’s
trade, which enjoyed some
scarcity value with Australian
major banks having largely
abandoned the format following
a flurry of supply in early 2012.
The Big Four subsequently
focused on offshore covered
markets, especially in Europe,
although National Australia Bank
did return to raise A$1.5bn from
a three-tranche, five-year and 10-
year trade in March this year.
Relative value investors
appreciate the extra pick-upoffered over alternative
Triple A rated issuers, notably
supranationals and agencies that
pay around 30bp–35bp over asset
swaps for three-year Kangaroo
bonds and about 35bp over for
five-year Australian paper.
On the flip side, many non-
Triple A investors who are
comfortable with a credit target
the returns available in senior
unsecured format since covered
bond spreads are typically
around a third lower than banks’
senior unsecured benchmarks.
ING Australia (IBAL) has not
accessed the senior unsecured
market for almost five years
but it regularly visits the RMBS
market, with its last transaction,
in May 2017, raising A$1.17bn
through IDOL 2017-1 Trust.
There are no plans for a new
RMBS issue this year, Casey said.
Covered pricing is also
significantly tighter than RMBS,though many funds are excluded
from the latter because their
mandates only allow purchases
of fixed-rate, fixed-term
instruments.
The last non-major bank to
issue RMBS was on August 2
when Members Equity, through
SMHL Series 2018-1, paid a
coupon of one-month BBSW plus
111bp for the A$1.15bn Class A
notes with a 2.7-year weighted
average life.
IBAL follows Suncorp as
Australia’s second non-major
bank to issue domestic covered
bonds, though Macquarie
and Bank of Queensland both
printed €500m five-year notes,
in February 2016 and June 2017,
respectively.
BoQ’s covered debut was
the first to have a conditional
pass-through structure which
allows maturity extensions if the
issuer defaults on repayment,News