(Bloomberg) — Berkshire Hathaway has begun approaching investors for its second yen bond deal this year, as expectations for another rate hike soon in Japan fade.
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Warren Buffett’s firm is considering selling seven tranches of 30-year bonds, with an initial estimate of a spread of about 95 basis points (bp) over midswaps, according to people familiar with the matter. guidance is provided. The issuer plans to decide on a deal price as early as October 10, said the people, who requested anonymity because the matter is private.
The billionaire investor’s financing plans have attracted attention from stock market investors, as Buffett uses yen funds raised in the bond market to buy stocks in Japanese companies. His purchases of shares in Japan’s largest trading companies helped push the Nikkei stock average index to record highs earlier this year.
Berkshire’s yen bond deal would come as Japanese corporate bond yields have fallen along with government note yields due to a change in the Bank of Japan’s policy outlook. Expectations changed after newly elected Prime Minister Shigeru Ishiba said Japan’s economy was not yet ready for further rate hikes and took the unusual step of submitting what appeared to be policy recommendations to the central bank. .
Japanese corporate bond yields have fallen to about 0.92% from about 1.07% at the end of July, according to data compiled by Bloomberg. The benchmark 10-year Treasury yield fell 17.5 basis points to 0.87% during this period.
After the Bank of Japan surprised much of the market in July with its second interest rate hike of the year, Berkshire’s initial guidance for yen bond spreads widened for all three-year tranches. For example, demand for 10-year bonds is being sought at spreads of about 80 basis points, compared to spreads of about 70 basis points for similar maturities sold in April.
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