Bloomberg News

Nippon Telegraph Plans Dollar Debt Sale as BTMU Markets Notes

February 18, 2013

Nippon Telegraph & Telephone Corp. and Bank of Tokyo-Mitsubishi UFJ Ltd. are marketing U.S. dollar- denominated notes after Japanese corporate debt risk fell to a 1 1/2-year low.

NTT Telegraph & Telephone, which owns Japan’s largest mobile phone company, is offering seven-year bonds at about 90 basis points more than similar-maturity Treasuries, according to a person familiar with the matter, who asked not to be identified because the terms aren’t set. Bank of Tokyo- Mitsubishi plans to sell three-, five-and 10-year securities, a separate person said.

The cost of insuring an index of Japanese corporate bonds from non-payment reached 117 basis points on Feb. 13, the least since July 2011, according to traders of credit-default swaps. Companies from the East Asian country pay an average 2 percent to sell dollar debt, 1.02 percentage points less than a year ago, according to Bank of America Merrill Lynch indexes.

“The funding position is favorable,” said Manabu Tamaru, a fund manager at Baring Asset Management Co. in Tokyo. Borrowers “might suspect that a U.S. interest rate increase is in progress and want to fund the money while the rate is very attractive. They will also diversify their funding base.”

Benchmark U.S. 10-year government yields will rise to 2.32 percent by Dec. 31 from 2.01 percent today, according to Bloomberg surveys, with the most recent predictions given the heaviest weightings. The forecast has climbed from 2.14 percent in the first week of January.

Dollar Offerings

Japanese borrowers raised $46.3 billion selling U.S. currency bonds last year, the most in Bloomberg data going back to 1999. Sales have totaled $6.8 billion so far in 2013, the data show.

Bank of Tokyo-Mitsubishi is considering selling five-year bonds at about 85 basis points more than Treasuries and 10-year debt at about a 125 basis-point spread, the person familiar with the matter said. The lender will also sell three-year notes, which may be fixed- or floating-rate, at about 65 basis points more than U.S. government debt and an equivalent spread over the three-month London interbank offered rate, the person said.

Korea Housing Finance Corp. meanwhile plans to meet investors in Hong Kong and Singapore this week to discuss a sale of dollar-denominated covered bonds, a separate person with knowledge of the matter said.

The Markit iTraxx Japan index climbed 1.5 basis points to 124 basis points as of 9:08 a.m. in Tokyo, Deutsche Bank AG prices show. The measure is set to pare its drop this month to 11 basis points, according to data provider CMA.

Australia Risk

The Markit iTraxx Australia index increased 1 basis point to 113 as of 11:07 a.m. in Sydney, according to National Australia Bank Ltd. prices. The gauge is headed for its third straight daily rise after falling to the lowest in more than a month at 112.5 on Feb. 14, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 0.5 of a basis point to 110 basis points as of 8:13 a.m. in Hong Kong, according to Credit Agricole SA prices. The benchmark is set to close at the lowest level since Jan. 29, CMA data show.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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