(Sept 4): SoftBank Group Corp priced a ¥1 trillion (US$6.3 billion) retail bond with a coupon of 4.75%, as higher rates boost the appeal of bonds, potentially drawing more companies to retail funding.

The seven-year notes were priced on Friday at the higher end of the 4.3%-4.9% range announced by the company last month, according to a company filing. The average coupon on yen-denominated retail corporate bonds issued in Japan this year was 2.3%, data compiled by Bloomberg show. 

The offering comes as Japan’s 10-year government bond yield topped 3% for the first time in about 30 years, making bonds an attractive option for households that have traditionally kept much of their financial assets in bank deposits.

“The yield level and ¥1 trillion size could draw new individual investors into the market,” said Kazuma Ogino, senior credit analyst at Nomura Securities Co. Retail investors who hold bonds to maturity are less exposed to interim price swings and can benefit from higher yields, which he said is “a tailwind for the retail bond market”.

Issuance of yen-denominated retail corporate bonds in Japan has reached ¥2.88 trillion so far this year, including SoftBank Group’s ¥1 trillion deal, already surpassing every previous full-year total as of Sept 4, according to data compiled by Bloomberg.

As companies’ funding needs for mergers and acquisitions and growth investments rise, large institutional bond sales can put pressure on spreads. “Tapping retail investors can diversify funding sources and ease that pressure,” Ogino said. “That could be a win-win and help broaden the retail bond market.”

Uploaded by Liza Shireen Koshy