Sunday, 21 October 2018

Yen Bond House: SMBC Nikko

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  • Moving on up

Moving on up

The yen bond market operated against a backdrop of extreme uncertainty in 2013 thanks to a major policy shift at the Bank of Japan and an unfavourable basis swap which crimped Samurai issuance. For negotiating this backdrop, showing leadership and consolidating its franchise, SMBC Nikko is IFR’s Yen Bond House of the Year. 

SMBC Nikko emerged from the acquisition by SMBC of Nikko Cordiale Securities from Nikko Citigroup in late 2009, renaming itself under its present incarnation in April 2011. While Nikko has a long history in the yen bond market as one of the original “big four” Japanese securities companies, the SMBC Nikko franchise can be regarded as something of a start-up.

It is therefore rather a stellar achievement for the company to have moved up in the yen bond league tables from fifth position in 2011 to second position in 2013 for the period under consideration in the IFR awards calendar. To have done so in what was one of the most challenging years for the yen bond market in recent memory is all the more impressive.

Blame it on Abenomics or the attempts of Japan’s prime minister Shinzo Abe to shock the country out of decades of economic slumber, but this was no ordinary year for the yen bond market. When incoming Bank of Japan governor Haruhiko Kuroda announced a massive quantitative easing programme in April as part of the Abenomics agenda it seemed the damage he inflicted on yen rates markets would not quickly reverse.

Shell-shocked domestic investors were nursing portfolio losses on JGBs and credit spreads were hovering near historic lows so it’s perhaps no surprise that there was an immediate effective buyers’ strike. Add to this a less than benign basis swap from yen into US dollars and a US dollar offshore market where deals could print with abandon and life was particularly tricky for those trying to sell yen bonds.

Into this vacuum stepped Rabobank, which in May confidently reasserted the viability of the Samurai market with a multi-trancher and in the process paved the way for subsequent issuance.

SMBC Nikko won this mandate from one of the Samurai market’s most exacting and sought-after frequent issuers, having appeared on its first Rabo trade in May 2011, a month after the SMBC acquisition, but having been absent for the three subsequent trades from the Dutch bank.

“In Tokyo we have been building up both our syndication and distribution capability ever since the inception of SMBC Nikko. In particularly we have focused very much on our ability to place primary paper across the investor landscape in Tokyo to include both blue-chip Tokyo Central accounts as well as the middle market. We are now competing at the top table in terms of distribution into Japan,” said Koh Kawana, head of global fixed-income capital markets at SMBC Nikko.

SMBC Nikko has ticked the standout boxes in 2013, including bringing inaugural Samurais for Slovakia, Pohjola and Credit Agricole, earned repeat mandates from Rabobank and GECC and its first on a euro corporate deal, for Daimler. The company has added ABS capacity as a signal result of growing its DCM and syndicate team in London – from 11 in 2012 to 15 – and doubled headcount in New York to six.

In terms of league table, SMBC Nikko topped the global and euroyen issuance table with a 27.4% market share off nine issues and stood at second position for Samurais with 17.9% of the market via 33 issues.

“For the first time in our three years’ existence, 2013’s performance has truly felt more complete in terms of global DCM reach,” said Sam Amalou, head of DCM at SMBC Nikko.

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

To purchase printed copies or a PDF of this report, please email

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