Shaken, but not stirred
One Japanese bank successfully kept the domestic and cross-border yen markets running by bringing the right issuers at the right times in the right tenors and playing an active role in the ESG space. That bank is Mizuho, IFR's Yen Bond House of the Year.
The yen market was shaken by rising US interest rates and changing expectations for the Bank of Japan's monetary policy, but, contrary to expectations, issuance volume did not shrink in either domestic or cross-border yen markets.
The yen markets were quiet in the first quarter amid heightened uncertainty about whether new BoJ governor Kazuo Ueda would scale down his predecessor Haruhiko Kuroda's bold monetary easing policy when he took over in April. Still, Mizuho helped Nissan Motor raise ¥200bn (US$1.4bn) from a three-part sustainability bond offering in January, with its coupons of over 1% helping to attract investors.
Market conditions improved in April as Ueda stressed the central bank would maintain its monetary easing, but many investors avoided long-end tenors due to lingering caution about BoJ policy. Despite this, Mizuho as joint lead manager helped Japan Tobacco sell a relatively large ¥20bn 20-year note in a three-part deal in April thanks to its scarcity value.
The bank also reopened the cross-border yen market that month by bringing high-profile issuer Berkshire Hathaway. By adding a three-year tranche, the US conglomerate successfully printed a ¥164.4bn five-year global bond even when some investors were also cautious about foreign credits after the collapse of Silicon Valley Bank and Credit Suisse in March.
“This year has been marked as an historic turning point in the trajectory of yen interest rates,” said Masaya Mizobuchi, head of global debt capital markets at Mizuho. “Deals might have been a no-go and not just us, but everyone in the markets, put our heads together to invigorate the markets.”
With many TLAC bonds maturing in 2023, there were concerns that rising yen rates might hamper investors reinvesting, but Mizuho was able to “cultivate market confidence gradually”, said Mizobuchi, by bringing the right issuers at the right times. Indeed, many of the FIG issuers Mizuho assisted in 2023 drew over ¥100bn of demand each, as it identified interest for three and five-year senior tranches.
Mizuho also introduced new credits to Japanese investors. The new issuers included US online payment company PayPal, South Korea and South Korean internet giant Naver. The bank also helped France's EDF, National Australia Bank, Poland and ING return to Japan after a few years' absence. Investors and bankers at other firms were impressed as many of these deals were oversubscribed and Berkshire drew a large order book even for a follow-up ¥122bn deal in November.
Mizuho took an interesting approach in the domestic market, which is largely limited to investment-grade issues. Exploring new market opportunities, it solely led Japan Investment Adviser's ¥3.5bn two-year bond, the first unrated bond offering in Japan. No other unrated issuers have followed yet, but it marked an important step in the development of the domestic market.
Mizuho played a role in the ESG space, getting involved in most of the year's transition bonds and blue bonds. Both are key products for Japan, given the country has committed to issuing sovereign transition bonds and is well aware of the importance of preserving marine resources as 39 out of its 47 prefectures face the sea.
Iwate Prefecture became the first local government to issue green bonds to fund blue projects in July, with Mizuho acting as structuring agent. Mizuho assisted Indonesia to sell a ¥104.8bn deal which included blue bond tranches, the first blue Samurai and the first blue bond from an Asian sovereign.
Despite the early fears, 2023’s domestic corporate bond issuance volume was ¥14.9trn, bigger than the ¥12.12trn the previous year, and all international yen bond issuance volume was ¥3.04trn, the highest since 2019, according to LSEG data. Mizuho took top spots in both categories with respective shares of 23.8% and 20.8%.
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