Govt in talks over 2nd Samurai bond, seeks lower rates

Malaysia marked its return to the Japanese bond market after 30 years


MALAYSIA is in talks with Japan for the issuance of a second yen-denominated bond with a lower interest rate.

Japanese Ambassador to Malaysia Dr Makio Miyagawa (picture) said the two governments have engaged in discussions on a subsequent debt sale following the success of the ¥200 billion (RM7.34 billion) 10-year Samurai bond issued in March.

Miyagawa said in a recent exclusive interview with The Malaysian Reserve that both Prime Minister Tun Dr Mahathir Mohamad and Finance Minister Lim Guan Eng had expressed a strong interest in issuing a second tranche of the Samurai bond.

“We are now working very hard to reduce the interest rate. The amount of the bond could be similar, depending on the Finance Ministry, but the interest rate would surely be a substantially smaller figure,” Miyagawa said.

Malaysia marked its return to the Japanese bond market after 30 years with the issuance of a 10-year Samurai bond earlier this year as part of the government’s efforts to raise funds to repay borrowings incurred by the previous administration.

The issuance of the Samurai bond, with a coupon rate of 0.63% per annum, has been a success with an oversubscription of more than 1.6 times at ¥324.7 billion.

Mizuho Bank Ltd, HSBC Bank Malaysia Bhd and Daiwa Capital Markets Ltd in collaboration with Affin Hwang Investment Bank Bhd acted as joint lead arrangers and bookrunners for the issuance of the first bond.

Japan, the world’s third-largest economy, is known for its ultra-low rates. In January, the Bank of Japan pledged to keep its 10-year government bond yields at zero percent as central banks loosen monetary policies in the face of a global economic slowdown.

Last Friday, Bloomberg reported that Japanese state-backed agency Japan Student Services Organisation priced a ¥30 billion bond with a negative yield for the first time.

The two-year notes with a coupon rate of 0.001% and a price of about 100 yen, add to a yield of minus 0.0005%.

Elsewhere, bond yields continue to tumble across major markets as Germany sold €869 million (RM4.03 billion) of 30-year bonds with zero coupon for the first time ever.

The amount adds to the US$17 trillion (RM71.2 trillion) of negative-yielding bonds outstanding globally.

Miyagawa, who is serving his fifth year as ambassador in Malaysia, did not specify a timeline for the issuance of the bond, saying it is up to the Malaysian government.

“We are very happy to go along. This term ‘Samurai’ bond, the Samurai spirit, which is still alive in our country, is to offer anytime helping hands to those who are suffering.

“So, this is in tune with the real spirit of the Samurai,” Miyagawa said.