One point separates winner from loser in Japan debt market

A single extra basis point separated a successful bond deal from a failed one as investor demand turns more fickle in Japan’s debt market. State-backed Japan Housing Finance Agency priced 30-year notes on Tuesday with a yield premium of 14 basis points over government debt, and bond buyers welcomed the ¥15bn ($132mn) offering, according to investors.

That spread was just one basis point higher than a similar deal by Urban Renaissance Agency in September whose notes didn’t sell out, according to people familiar with the matter. An increased number of Japanese non-government bonds have gone unsold at issue in recent months, as a surge in offerings following a central bank policy tweak sapped demand for some notes.

JHF’s latest deal may stop more agency bonds from going unsold, said one investor who was familiar with the deal and declined to be identified. Japanese agencies tend to watch each other’s pricing levels carefully.

By the standard of the nation’s agency debt market, JHF’s move to increase the spread by one basis point compared with Urban Renaissance’s note was unusually fast.

The firm’s flexibility may help improve the image of agency debt, which has been seen slow to respond to market changes, according to another investor. Orders for JHF’s latest bond deal came to 2.2 times the amount issued, according to underwriters.

JHF securitises private-sector bank loans, and is well known to many Japanese homeowners through its super-long fixed home mortgages.

Jotaro Niwa, chief director of the bond issuance group at JHF’s market operation department, said the issuer had placed importance on talks with market participants during the sale of the bond.