JPMorgan Joins Samurai Boom With Biggest Sale Since October

JPMorgan Chase & Co. (JPM), the biggest U.S. lender, raised 105.6 billion yen ($1.1 billion) in the largest sale of Samurai bonds since October as overseas borrowers flock to a market flush with stimulus cash.

The four-part offering includes 51.5 billion yen of 0.462 percent three-year bonds priced to yield 10 basis points more than the yen swap rate, and 27 billion yen of 2018 notes at a spread of 14 basis points, according to data compiled by Bloomberg. The New York-based lender also sold 10-year fixed-rate and three-year floating-rate debt, the data show.

JPMorgan follows Rabobank Nederland and Nordea Bank AB in offering Samurai notes as Bank of Japan Governor Haruhiko Kuroda’s plan to double the monetary base helps bolster demand for higher-yielding debt. HSBC Holdings Plc’s banking unit, Credit Agricole SA and the Slovak Republic are planning offerings this month, according to regulatory filings.

“Investors are looking to shift their portfolios from government bonds, but they can’t really go into the more volatile securities like stocks,” Mana Nakazora, Tokyo-based chief credit analyst at BNP Paribas SA, said in a telephone interview. “The issuers are taking advantage of the strong investor appetite for foreign bonds.”

Photographer: Victor J. Blue/Bloomberg

Pedestrians walk by the offices of JPMorgan Chase & Co. in New York. Close

Pedestrians walk by the offices of JPMorgan Chase & Co. in New York.

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Photographer: Victor J. Blue/Bloomberg

Pedestrians walk by the offices of JPMorgan Chase & Co. in New York.

The central bank on April 4 announced plans to double monthly purchases of sovereign bonds to more than 7 trillion yen to achieve 2 percent inflation in two years. Ten-year yields plunged to a record low of 0.315 percent next day, then surged to a year-high of 1 percent last month.

Samurai Surge

Japan’s Topix (TPX) index is down 16 percent from a May 22 five-year high. Japanese stock prices are swinging by the most in more than two years, with a measure of 15-day historic volatility on the gauge jumping to 44.31 yesterday, the highest since immediately after the nation’s 2011 earthquake, tsunami and nuclear accident.

Sales of Samurai bonds, yen-denominated notes sold by overseas borrowers in Japan, surged to 223 billion yen last month, the most since November, according to data compiled by Bloomberg. Today’s sale is the biggest offering since Rabobank’s 161.8 billion yen five-part deal in October.

JPMorgan’s offering ends a drought of more than a year for Samurai issuance by U.S. borrowers. The lender last tapped the market in February 2012 when it raised 161.5 billion yen, including 145.9 billion yen of 1.32 percent five-year debt priced at an 80 basis-point spread, according to data compiled by Bloomberg. Goldman Sachs Group Inc. sold 82 billion yen of notes later that month, the data show.

Tax Exemption

The U.S. government decided in March 2012 to extend the tax exemption to Japanese holders of Samurai bonds issued by American borrowers until the end of this year, according to Linklaters Tokyo. JPMorgan’s offering today falls under the rule, known as “foreign-targeted registered obligations,” Kozo Sasaki, a partner at the law firm, said today in a telephone interview.

The U.S. law is incorporated into the regulations of the Japan Securities Depository Center Inc., a Japanese clearing system, Sasaki said. Linklaters Tokyo and Linklaters New York acted as Japanese and U.S. tax counsel to the lead manager of today’s offering.

To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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