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Sunday, 19 November 2017

Yen Bond House: Daiwa

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  • Unbeatable performance

The Samurai bond market had not been as robust as it was in 2014 in years. But that only made for increasingly intense competition. For bringing the most notable deals and leading the way in volume, Daiwa is IFR’s Yen Bond House of the Year.

The Samurai bond market has rarely been as important as it is now. The Bank of Japan’s unprecedented monetary easing programme squeezed investors out of comfortable but low-yielding JGBs, leaving bond buyers desperate for better returns and making Samurai bonds hugely attractive even as credit spreads within that market were at historic lows.

Investors that were already active in Samurais were ready to buy riskier names with longer tenors, while new investors such as regional banks, corporations and universities were also finally ready to venture out into the Samurai universe.

To excel in such an environment, Daiwa called on its coverage around the globe, seeking new relationships, while keeping in close contact with existing ones across financials, SSA and corporations.

Daiwa was the only bank to win grand slams on Scandinavian and Australian deals, leading all of the Samurai deals from those markets, and was one of the joint bookrunners for the sole debut Samurai bond since last year – from France’s Caisse des Depots et Consignations.

“We like to think that we have a strategy to cover every client’s needs and this year we have certainly expanded significantly the market solutions available to an ever-growing group of both issuers and investors,” said Vince Purton, head of capital markets at Daiwa.

This year’s stand-out deal for Daiwa was Deutsche Bank’s massive ¥133.1bn (US$1.15bn) Samurai, on which Daiwa was the only other joint bookrunner aside from the issuer’s local securities arm. The rare issuer chose other banks for a lower position as co-arrangers in its deal, which was its first in four years.

These achievements put Daiwa at the top of the league tables, even though it lacks the same breadth of lending relationships that some traditional banks leverage to win bond business.

“They have good coverage from London and Tokyo that really works very well,” said an official at one Samurai issuer. “Aside from looking at just the deals, I also look at the most valuable thing – human assets. That makes the whole thing work, and allows them to get more mandates.”

Being number one in the league tables would have given Daiwa little time to stop and think about how to bring innovation into the mix of deals, but it did not disappoint in this respect. Albeit small in size, the first socially responsible investment bond in yen came from the European Investment Bank, via a ¥5bn deal which was sole-led by Daiwa, setting a template for other issuers to follow.

The bank also brought the only retail-targeted Samurai of the year, from Instituto de Credito. The deal saw an impressive return of appetite for an issue by a Spanish financial name after issuers from the country had been absent for four years.

The impressive roster of important deals continued in the domestic bond markets. Daiwa worked on some of the most important bonds there, such as one of the first Basel III-compliant Tier 2 bonds, as well as SoftBank’s retail bonds.

Daiwa worked hard to bring new investors into Samurais this year, and the impact was a game changer. Pohjola Bank doubled its regional investor base versus last year, while BFCM and Nordea also saw meaningful increases in regional accounts that helped issuers squeeze pricing. Regional investors accounted for 40% of Deutsche Bank’s order book, for example.

“We led the way in the development of a strong regional placement platform for Samurai product across every prefecture in Japan from Hokkaido to Okinawa,” said Purton. “Regional placement adds significant merit to Samurai issuance insofar as it offers a depth of penetration not available in other markets.”

Samurai issuers seemed to agree, picking Daiwa for its second-to-none distribution abilities.

To see the digital version of the IFR Review of the Year, please click here.

To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com.

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