[TOKYO] Berkshire Hathaway sold 90 billion yen (S$834 million) of bonds on Friday (Apr 11) in its smallest yen deal ever in a market rocked by an escalating trade war.
All six tranches in the offering by Warren Buffett’s firm, ranging from three years to 30 years, offered higher premiums than the previous yen note sale in October. Three-year notes, the biggest part of the offering today, had a spread of 70 basis points compared with 49 basis points in the prior sale.
“Generally speaking, even if an issuer paid the maximum spread that it can offer, investors may not be able to buy in the current market condition,” said Shunsuke Oshida, head of credit research at Manulife Investment Management Japan. “Although they want to increase their exposure, they would want to wait for the market to calm down.”
The following table shows the increase in yield premiums for comparable tenor bonds today versus the previous yen offering in October:
Berkshire pushed ahead with the yen deal even as market volatility prompted several Japanese companies, including Suntory Holdings and Nissin Foods Holdings to cancel sales. Buffett has been tapping the Japanese corporate bond market since 2019, and his yen fundraising has been closely watched by investors because his purchases of shares, including trading firms have bolstered optimism in the past towards the nation’s equity market.
The US company boosted its holdings in Japan’s five biggest trading houses last month, and Buffett’s annual letter to shareholders in February signalled plans to do so.
The billionaire wrote that the five firms, including Mitsubishi and Itochu, “very successfully operate in a manner somewhat similar to Berkshire itself”, and “as the years have passed, our admiration for these companies has consistently grown”.
His enthusiasm for the Japanese companies caught the attention of global investors, helping attract funds from overseas and lifting the nation’s Nikkei 225 and Topix share indexes to record highs last year.
The two benchmarks have both tumbled more than 10 per cent this year on concern that intensifying trade conflicts between the US and China, the world’s two biggest economies, will slow global growth. BLOOMBERG
