Japanese Rate Hikes Present a Hurdle for Corporate Bond Issuers
Japan’s rapidly rising interest rates are providing another significant variable for corporate treasurers with upcoming bond offerings or refinancings to monitor. While the deluge of debt issued by so-called hyperscalers has yet to increase other companies’ borrowing costs, it’s critical for treasurers to track it alongside another recent development: rapidly rising Japanese interest rates. The…
Japan’s rising interest rates pose challenges for corporate bond issuers, as treasurers must now monitor this additional variable alongside their usual concerns. While hyperscalers have not yet driven up borrowing costs for other companies, Japanese investors hold a staggering $1.2 trillion of U.S. federal debt and are significant buyers of U.S. corporate bonds.
Japanese government and private investors switched from being net buyers to net sellers of long-term U.S. debt securities in the 12 months leading up to May 31, 2023. This trend, coupled with the rapid increase in Japanese government bond rates from near-zero levels to nearly 2.9% by mid-August, may lead to higher borrowing costs for U.S. issuers.
Amol Dhargalkar, a senior managing director at Chatham Financial, warns that Japanese investors' potential selling of U.S. securities could create selling pressure and drive up U.S. rates. The Japanese government has intervened to counter the yen's weakening against the U.S. dollar, which may require further rate hikes by the Bank of Japan.
CFOs and finance teams must now consider these new factors when making capital markets transactions.
Written by urgent.news from Global Finance's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
