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SEOUL: Korean companies are raising record amounts of yen this quarter, taking advantage of the lowest yields in nine years as Japanese investors seek higher returns.


Led by Korea Development Bank, sales of so-called Samurai bonds denominated in yen rose to 130 billion yen (US$1.6 billion) in the second quarter from 30 billion yen in the previous three months, according to data compiled by Bloomberg. With two weeks left before the end of the current period, offerings have already surpassed the previous record of 120 billion yen in the last quarter of 2007, the data show.


Yields on Japanese corporate securities were at an average 0.703% yesterday, about the lowest since September, and were less than a quarter of the 3.42% paid by companies worldwide, Bank of America Merrill Lynch bond indexes showed. Investors' pursuit of a haven from Europe's debt crisis pushed Japan's government bond yields this month to the lowest since June 2003, dragging down interest rates on company notes.


"Investor worries over Europe's woes are forcing them to buy yen-bonds of Korean" issuers, Takayuki Atake, chief credit analyst at SMBC Nikko Securities Inc., said in a telephone interview yesterday. "Demand for Samurais is strong because of the low spreads offered by Japanese companies."


The state-owned lender known as KDB raised 30 billion yen in yen-denominated notes yesterday, according to data compiled by Bloomberg. The offering comprised 21.2 billion yen of 1.05% two-year notes at a 65 basis point yield premium to the yen swap rate, 5.1 billion yen of 1.17% three-year bonds at a 77 basis point spread and 3.7 billion yen of 1.31% five-year debt with an 85 basis point gap, the data show.


Sovereign Yields


Japan's five-year rates were at 0.23% in Tokyo today, after dropping to 0.195% on June 1, the lowest since at least 2004, according to data compiled by Bloomberg.


The nation's benchmark 10-year yield slid to 0.79% on June 4, the least since 2003 when it fell to a record 0.43%. The rate fell half a basis point to 0.855% today, the lowest globally after Switzerland's yield.


The cost of borrowing for Japanese companies fell 13 basis points, or 0.13 percentage point, this year to 0.703% yesterday, while that of companies worldwide plunged 56 basis points to 3.42%, according to Bank of America Merrill Lynch indexes. The average yield on Japan's government securities declined 9 basis points to 0.615% in the period, according to the data. (Bloomberg/aph)