Record NTT Bond Deal Forces Japan’s Firms to Pay More to Borrow

(Bloomberg) -- Japan’s biggest-ever yen corporate bond sale has made this the busiest December on record for the market, and the flood of supply is forcing companies to pay more for money.

Panasonic Corp. is marketing a note sale with higher yields than last week’s record 1 trillion yen ($9.7 billion) Nippon Telegraph & Telephone Corp. debt deal. The NTT offering itself priced with what investors called attractive coupons. Daicel Corp. recently sold bonds that had yield premiums several basis points higher than similar-maturity debt issued last month by Haseko Corp., which has the same credit rating.

The tick-up in financing costs may actually show that Japan’s credit market is coming into its own. The NTT sale underscored that the market, small by global standards relative to the nation’s economy, is ready for more expansion. The higher coupons are still low enough to be tolerable for borrowers, while giving yield-starved investors a bit of a lift. And any gradual increase in yields might also be welcomed by authorities who’ve long battled deflation.

NTT’s mammoth bond sale has pushed up total corporate note offerings to 1.57 trillion yen this month, reversing last month’s decrease for the most active December since at least 2009, according to Bloomberg-compiled data. The rush is in line with record global issuance of corporate notes as policy makers flood markets with cash to fight the economic damage caused by the pandemic.

Panasonic’s higher coupons would come even though its credit ratings are broadly in line with NTT’s, at A- from S&P Global Ratings versus an A grade for the telecom firm.

The company is offering a three-year bond at 0.08% and five-year notes at 0.19%, higher than NTT’s 0.05% and 0.18% respectively for similar-maturity securities.

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