(Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. sold yen bonds at a lower price in its second Japan deal of the year as speculation grew that billionaire investors might park more money in the country’s stock market.
In the offering of 122 billion yen ($810 million) of five tenor notes ranging from three years to 35 years, the company was able to narrow the spread compared to its previous sale. Three-year bonds traded at a premium of 59 basis points compared to swaps of 75 basis points in April, at a time of increased market volatility following the appointment of Kazuo Ueda as governor of the Bank of Japan and banking sector problems overseas. The price was fixed.
Berkshire is one of the largest foreign issuers of yen debt, and 32 of its last 40 bond deals have been in Japanese currency. It is also a keen investor in Japan’s equities: Buffett announced in June that he had increased his stakes in companies including Mitsubishi Corp and Itochu Corp, improving the country’s overall stock market sentiment and sending the shares up 33 years. Helped in taking it to the highest level.
An analyst at Daiwa Securities Co. wrote earlier this month that experienced investors may look to Japanese banks, insurers and automakers as their next investment targets.
Coupons on Berkshire bonds rose compared with the April sale, but they increased less than the equivalent swap rates used to calculate premiums, narrowing spreads. Most economists expect the BOJ to change its super-easy monetary policy by April, although the UDA has indicated the policy shift will only be gradual and Japan’s sovereign yields have retreated from their highs in recent sessions.
Yen bond issuance from foreign issuers has remained strong even after the BOJ effectively loosened the 1% cap on 10-year sovereign bond yields last month. Foreign corporate and sovereign borrowers, including emerging market countries such as Poland, are taking advantage of cheaper funding costs as Japan’s rates are still lower than most economies.
“There are more foreign issuers visiting Japan than I remember, and I’ve met at least seven or eight bond issuers this week,” said Shunsuke Oshida, head of credit research at Manulife Investment Management Japan. “Interest rates are relatively stable, and they may be thinking they can get money cheaply.”
For foreign issuers like Berkshire that invest in yen assets, raising funds in the Japanese currency may be advantageous because they do not have to pay foreign exchange costs.
Sales of yen bonds surged more than 50% to about 2.5 trillion yen since the start of the fiscal year on April 1, the most in five years, according to data compiled by Bloomberg.
(Updates to coupon in fifth paragraph, quote, table with deal details.)
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