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Japanese investors seek credit plays

The spectacular revival of the samurai, Euroyen and global yen markets, begun in the second half of 1999, has continued this year and shows no sign of abating. Bankers expect the queue of corporate and sovereign borrowers to remain long for the rest of the year and for Japanese buyers and international investors moving into yen bonds to keep on buying corporate and even emerging market issues on the primary and secondary markets.

The yen-denominated corporate credit market has become one of the most dynamic sectors of the capital markets. In January this year, Ford raised ¥100 billion ($948 million), the largest ever Euroyen corporate issue. Other international corporate issuers of yen bonds this year have included Procter&Gamble, McDonald's and DaimlerChrysler. Westpac Banking Group issued in January the First global yen bond for a commercial bank when it raised ¥50 billion. "Up to last summer there were just a few sovereign and supranational names. Now half the transactions are being done by corporates - the credit spectrum has expanded significantly in the last six months", says Kenji Kimura, co-head of primary business at Nomura.

"It is now accepted that there is a market and an investing public for corporate names", says Philip Porter, senior managing director at Tokyo-Mitsubishi International (TMI).

The "sweet spot", say bankers is for single A-rated well-known corporate names, which give security and a good yield.

And, as the credit spectrum broadens, emerging sovereign borrowers from single A right down to single B-rated are also becoming extremely popular among yen investors. In February, Turkey, rated at BB+, became the First emerging market sovereign to enter the market in 2000 with a ¥35 billion samurai issue.

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