Morgan Stanley Sells its First Samurai Bonds Since Credit Crisis

Morgan Stanley sold 150 billion yen ($1.5 billion) of Samurai bonds in its first offering of the yen-denominated notes since the financial crisis.

The New York-based bank issued 122.5 billion yen of four-year fixed-rate debt at a yield of 0.557 percent as part of a three-tranche offering today. It was the biggest sale since Rabobank Groep sold 161.8 billion yen of similar notes in October 2012, according to data compiled by Bloomberg.

Morgan Stanley’s offering was in excess of a 130 billion yen cap on the deal that was set as late as yesterday, two people familiar with the matter said. The last time the bank sold Samurai bonds was in January 2008, as the subprime mortgage crisis in the U.S. intensified and led Lehman Brothers Holdings Inc. to collapse later that year.

“Demand for Samurai bonds among investors is strong,” said Ryosuke Kaneko, a credit analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The fact that Morgan Stanley hasn’t sold for a while was a big factor.”

The number of U.S. Samurai issuers has also declined in favor of European names in recent years, and that may have supported demand for Morgan Stanley’s sale too, Kaneko said.

Japan’s Samurai market is recovering from just 60 billion yen of sales in the first quarter of last year, which dragged full-year issuance down to its least in four years. Unprecedented stimulus by the Bank of Japan pushed the average yields on yen notes offered by overseas borrowers to 0.599 percent on April 15, the lowest on record in data going back to October 2000, Bank of America Merrill Lynch indexes show.

Credit Rating

Morgan Stanley’s notes are expected to be rated A- by Standard & Poor’s, the fourth-lowest investment grade, and A by Japan’s Rating & Investment Information Inc., one level higher, according to a statement from sale co-manager Mitsubishi UFJ Morgan Stanley Securities Co. That’s in line with Morgan Stanley’s corporate ratings.

Utrecht, Netherlands-based Rabobank sold 100.3 billion yen of Samurai bonds this week in its first such offering of the year. Nordea Bank AB, based in Stockholm, plans to issue Samurai bonds next week, two people familiar said today.

About 948 billion yen of Samurai bonds have been sold this year, a more than 15-fold increase over the same period a year ago, according to Bloomberg data.

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