WSJ: Japanese Yields Fall Strong Demand for Asian Dollar Deals
By MEGUMI FUJIKAWA And DITAS LOPEZ
Japanese government bond yields fell as an auction of 20-year paper saw steady demand despite the low coupon.
The benchmark 10-year yield fell 0.015 percentage point to 1.315% as the benchmark Nikkei Stock Average of 225 companies fell 1.3%, boosting the attractiveness of safe-haven assets.
The government sold 1.005 trillion yen ($) of 20-year bonds at a lowest price of 99.75, slightly higher than traders' expectations for 99.70, yielding 2.117%. The new bonds carry a coupon of 2.1%, lower than the previous issue's 2.2%.
Despite the low coupon, the auction went "smoothly," as domestic players, such as life insurers, have started to turn to government debt after investing in hedged foreign bonds in the previous business year, said Deutsche Securities strategist Makoto Yamashita.
The market had closed when Fitch Ratings warned that the country's credit ratings face downward pressure in the medium term due to the ballooning debt. Fitch estimates Japan's headline gross government debt reached 201% of gross domestic product at the end of the last year, the highest ratio of any country the agency rates.
It rates Japan's long-term local currency issuer default rating at double-A-minus, and the long-term foreign currency rating at double-A.
Among Asian corporate borrowers, two junk-grade Chinese property developers and a first-time issuer from Malaysia received strong demand for their international bonds.
Agile Property Holdings attracted about $4 billion in demand for its seven-year bond, allowing the developer to raise the issue size to $650 million from $500 million initially planned, a person familiar with the deal said. The bonds were priced to yield 8.875%, at the low end of the 8.975%-9% yield guidance.
Kaisa Group Holdings, which focuses on the development of large-scale residential properties in China's Pearl River Delta, garnered $620 million in orders for its $350 million bond, said a person familiar with that deal. The bonds were priced to yield 13.5%.
Malaysia-based regional mobile operator Axiata Group Bhd. said its $300 million, 10-year fixed-rate bond was more than eight times subscribed. The bond was priced to yield 1.63 percentage point over Treasurys, narrower than the initial guidance of around 1.70 percentage points over Treasurys.
