Oct. 27 (Bloomberg) -- Kaupthing Bank hf today became the first European borrower to default in Japan's samurai bond market after the state-controlled bank missed its last chance to make a 450 million yen ($4.8 million) coupon payment.

Two investors in the Reykjavik-based bank's 50 billion yen in 1.8 percent notes, who declined to be identified, said they hadn't received funds that were originally due on Oct. 20. Kaupthing had a one-week grace period to make its payment, according to the terms of the sale prospectus.

Yields on the bonds have risen as high as 45,000 basis points over the one-year yen swap rate to nearly 451 percent as investors hurried to unload the securities in recent days.

A basis point is 0.01 percentage point.

To contact the reporter on this story: Takashi Ueno in Tokyo at tueno@bloomberg.net; Oliver Biggadike in Tokyo at obiggadike@bloomberg.net.

Last Updated: October 27, 2008 03:11 EDT