Latest news with #creditmarket
Japan Times
17-07-2025
- Business
- Japan Times
Japan Inc. takes global credit by storm with record sales
Debt bankers and investors are bracing for what is shaping up to be the next big trend in the global credit market: Japan Inc. raising billions abroad. A string of recent megadeals is setting the tone. A giant sale by telecom giant NTT has already driven Japanese nonfinancial corporate issuance in euros and dollars to a record this year, based on data compiled by Bloomberg. One Morgan Stanley banker in London has even come up with a nickname for such bonds: reverse Samurai. Japanese companies are heading overseas to borrow as their local market is becoming too volatile and rates are rising. They are finding there is buoyant demand for credit among dollar and euro investors in much deeper and more stable pools of capital. "We see a decent pipeline for the year ahead,' said Matteo Benedetto, EMEA co-head of investment-grade syndicate at Morgan Stanley, one of the lead banks on NTT's and Nissan Motor's sales. "While strategic projects take time, we could potentially see a growing trend of Japanese borrowers tapping the international market.' The latest trio of Japanese sales, comprising NTT, Nissan and technology group SoftBank Group, totaled more than $26 billion and drew over $128 billion in orders. NTT's deal was the second biggest of the year in the entire U.S. market. Chipmaker Kioxia sold dollar notes on Wednesday in its debut bond issuance, having upsized the deal to $2.2 billion. Behind all this is a historic shift: Japan's bond market — a vast and formerly tranquil pool of capital — is becoming unpredictable for companies looking to raise funding. Government yields, previously kept in check by the Bank of Japan, are jumping as traders are concerned about government spending ahead of a July 20 election. For example, a seven-year, single-A corporate bond denominated in yen would be expected to pay about 1.6%, according to BVAL pricing. That's double the amount recorded about 18 months ago and far above the near-zero levels back in 2021. And with higher government bond rates, the extra yield on corporate bonds is no longer the only way to earn positive returns for yen-based investors. This has the potential to dampen demand for new credit issuance in the Japanese currency. Meanwhile Japanese firms, excluding financial institutions, have ¥13.2 trillion ($89 billion) of bonds coming due by the end of 2026, which along with acquisitions could drive the need for debt issuance, according to Sharon Chen, a credit analyst at Bloomberg Intelligence. "Utilities, transportation and telecom companies have large refinancing needs and might be more likely to tap the dollar bond market to raise long-term funding,' she said. "The dollar and euro markets' depth and longer tenors could make them more attractive than the domestic market.' By contrast to the Japanese market, borrowing costs for high-grade credit in both U.S. dollar and euros have either remained stable or fallen in the past couple of years, based on data compiled by Bloomberg. And investors in the U.S. and Europe are flush with cash from relentless investor inflows and ready to put money to work. NTT's multitranche issue raised $17.7 billion — a record for an Asian corporate — after drawing orders of more than $100 billion. "There are companies that want to fund and are being a little bit opportunistic, but they wouldn't be able to do it if there wasn't demand,' said Andreas Michalitsianos, portfolio manager at JPMorgan Asset Management. "That's the thing about supply. It only comes when there's demand and syndicate desks are very good at that.' To be sure, no offering will be guaranteed success. There's the chance of investor fatigue after a flood of recent borrowing. And there are plenty of risks from unpredictable U.S. trade policy. Still, global investors have a lot of capacity to add exposure to Japan. The country's borrowers account for only about 2% of the dollar high-grade index and 1.6% of the euro benchmark. It's a similar picture in junk bond trackers. This opportunity to buy little-seen names was among the selling points of bankers when placing the NTT issue. It could be their pitch for potential future deals as well. "There is so much interest right now for U.S. dollar and euro credit, especially in the context of diversification opportunities,' said Morgan Stanley's Benedetto. NTT "was a must buy.'
Bloomberg
11-07-2025
- Business
- Bloomberg
India Widens Global Funds' Access to $639 Billion Credit Market
India has expanded the usage of a derivative product popular with foreign investors, according to people familiar with the matter, giving them wider access to the nation's $639 billion credit market. The financial regulator for the special economic zone known as GIFT City has allowed global banks including HSBC Holdings Plc and Standard Chartered Plc to offer total return swaps for corporate bonds, the people said, asking not to be identified discussing a private matter.
Zawya
08-07-2025
- Business
- Zawya
Investors to double down on US junk bonds on another tariff tantrum
When President Donald Trump's 90-day pause on U.S. tariffs ends Wednesday, once-bitten-twice-shy bond investors could take on more risk by adding high-yield bonds to portfolios, rather than panic-sell credit as seen after April 2's 'Liberation Day' tariff announcement, said many fund managers and bankers. Credit market shops as a whole are likely to avoid a knee-jerk reaction to sell the riskiest bonds in their portfolios, and instead buy them as they view any impasse on tariff negotiations as a way to a watered-down solution rather than a non-negotiable outcome, the fund managers and bankers said. "Investors are likely to take any news of a tariff deadline extension in their stride and not overreact because there is always a put with this government – they will find some resolution to any impasse like they did post-Liberation Day,' said Sandeep Desai, co-head of North America leveraged debt capital markets at Deutsche Bank. High-yield credit spreads, or the premium paid by companies over risk-free Treasuries, touched their widest levels in two years in the days after Liberation Day, when Trump announced wide-ranging tariffs on 57 countries. Widening spreads mean an increase in borrowing costs and reflect market perceptions of a rise in default risk. But this negativity did not last beyond a fortnight, and spreads are now a whopping 149 basis points (bps) inside those levels as of last week's close, according to ICE BofA Global data.. On Wednesday, expectations of some sort of deal-making got a boost when Trump announced that the U.S. had struck a deal for a lower-than-promised 20% tariff on many Vietnamese exports. A retracement in spreads showed credit investors were simply not worried that the macroeconomic impact of tariffs would lower the ability of a broad swathe of companies with the riskiest credit ratings to make interest payments on their debt. The conviction in their fundamentals was so strong that even extreme geopolitical events - including an escalating war between Israel and Iran in late June - failed to push junk bond credit spreads or the default risk gauge wider. "There definitely seems to be a lot of looking through the headlines and what would, in prior periods, have served as extreme sources of volatility," said Michael Levitin, managing director and co-head of liquid credit at MidOcean Partners. For Joseph Lynch, global head of non-investment-grade credit at Neuberger Berman, it was a case of investors appreciating the improved quality of the high-yield bond universe. More debt has become secured by a certain amount of collateral, while more companies are using new deal proceeds to optimize their balance sheets rather than for leveraged buyouts, he said. Over the past five years, the percentage has increased to nearly 35% from 20% of U.S. high-yield bonds secured by collateral like physical assets or even shares, noted Jennifer Haaz, investment specialist at Penn Mutual Asset Management, in a recent report. These had a higher recovery rate than those that were unsecured in case of a default, she added. The extra security of collateral also helped companies reduce the cost of their debt, which investors viewed as a sign of more prudent balance sheet management by companies. HUNT FOR YIELD Junk-rated debt was also offering yields between 7% and 8%, which investors saw as more than compensating for any default risk when improved fundamentals were taken into account. This has increased demand, which has in turn created what bankers called a supply-demand imbalance and pressured spreads tighter. U.S. high-yield funds saw outflows of $8.42 billion in April after Liberation Day, according to data from the London Stock Exchange Group. But since then the direction of flow has reversed with high-yield funds receiving roughly $13 billion of inflows between May 1 and June 25. But only $149.8 billion in new U.S. junk bonds have been issued so far this year, versus more than $165.5 billion this time last year, according to JPMorgan research published last Friday. "You have a situation where the supply of bonds is just not keeping up with the demand," said Piers Ronan, head of debt capital markets at Truist Securities. Spreads could widen slightly, if at all, come Wednesday. If they do, Berman's Lynch said, "we could be allocating more capital to high-yield." (Reporting by Matt Tracy and Shankar Ramakrishnan Editing by Nick Zieminski)
Reuters
08-07-2025
- Business
- Reuters
Investors to double down on US junk bonds on another tariff tantrum
July 7 (Reuters) - When President Donald Trump's 90-day pause on U.S. tariffs ends Wednesday, once-bitten-twice-shy bond investors could take on more risk by adding high-yield bonds to portfolios, rather than panic-sell credit as seen after April 2's 'Liberation Day' tariff announcement, said many fund managers and bankers. Credit market shops as a whole are likely to avoid a knee-jerk reaction to sell the riskiest bonds in their portfolios, and instead buy them as they view any impasse on tariff negotiations as a way to a watered-down solution rather than a non-negotiable outcome, the fund managers and bankers said. "Investors are likely to take any news of a tariff deadline extension in their stride and not overreact because there is always a put with this government – they will find some resolution to any impasse like they did post-Liberation Day,' said Sandeep Desai, co-head of North America leveraged debt capital markets at Deutsche Bank. High-yield credit spreads, or the premium paid by companies over risk-free Treasuries, touched their widest levels in two years in the days after Liberation Day, when Trump announced wide-ranging tariffs on 57 countries. Widening spreads mean an increase in borrowing costs and reflect market perceptions of a rise in default risk. But this negativity did not last beyond a fortnight, and spreads are now a whopping 149 basis points (bps) inside those levels as of last week's close, according to ICE BofA Global data. (.MERH0A0), opens new tab. On Wednesday, expectations of some sort of deal-making got a boost when Trump announced that the U.S. had struck a deal for a lower-than-promised 20% tariff on many Vietnamese exports. A retracement in spreads showed credit investors were simply not worried that the macroeconomic impact of tariffs would lower the ability of a broad swathe of companies with the riskiest credit ratings to make interest payments on their debt. The conviction in their fundamentals was so strong that even extreme geopolitical events - including an escalating war between Israel and Iran in late June - failed to push junk bond credit spreads or the default risk gauge wider. "There definitely seems to be a lot of looking through the headlines and what would, in prior periods, have served as extreme sources of volatility," said Michael Levitin, managing director and co-head of liquid credit at MidOcean Partners. For Joseph Lynch, global head of non-investment-grade credit at Neuberger Berman, it was a case of investors appreciating the improved quality of the high-yield bond universe. More debt has become secured by a certain amount of collateral, while more companies are using new deal proceeds to optimize their balance sheets rather than for leveraged buyouts, he said. Over the past five years, the percentage has increased to nearly 35% from 20% of U.S. high-yield bonds secured by collateral like physical assets or even shares, noted Jennifer Haaz, investment specialist at Penn Mutual Asset Management, in a recent report. These had a higher recovery rate than those that were unsecured in case of a default, she added. The extra security of collateral also helped companies reduce the cost of their debt, which investors viewed as a sign of more prudent balance sheet management by companies. Junk-rated debt was also offering yields between 7% and 8%, which investors saw as more than compensating for any default risk when improved fundamentals were taken into account. This has increased demand, which has in turn created what bankers called a supply-demand imbalance and pressured spreads tighter. U.S. high-yield funds saw outflows of $8.42 billion in April after Liberation Day, according to data from the London Stock Exchange Group. But since then the direction of flow has reversed with high-yield funds receiving roughly $13 billion of inflows between May 1 and June 25. But only $149.8 billion in new U.S. junk bonds have been issued so far this year, versus more than $165.5 billion this time last year, according to JPMorgan research published last Friday. "You have a situation where the supply of bonds is just not keeping up with the demand," said Piers Ronan, head of debt capital markets at Truist Securities. Spreads could widen slightly, if at all, come Wednesday. If they do, Berman's Lynch said, "we could be allocating more capital to high-yield."
Forbes
27-06-2025
- Business
- Forbes
The Rise Of Private Credit: How Wall Street And DeFi Are Converging
Luke Lombe is a Founding Partner of Faculty Group—a global web3 venture studio—Director of and Founder of Over the past 15 years, the global credit landscape has undergone a quiet but radical transformation. In the wake of the 2008 global financial crisis, regulatory overhauls resulted in traditional banks scaling back lending to all but the safest borrowers. As a result, a segment of the market—particularly middle-market businesses and specialized industries—struggled to obtain funding. Enter private credit. Once considered niche, private credit has evolved into a multi-trillion-dollar asset class. From bulge-bracket firms to specialists, there's now a global race to deploy private credit into the real economy. But with this growth comes a challenge: There's more money than deals, and that's where the market is innovating. With more than a decade in Web3 and fintech, I've worked directly with global institutions and DeFi protocols to structure tokenized credit deals that align first-loss DeFi capital with senior TradFi funding—experience that has given me a firsthand view of some of the solutions taking shape. The Post-GFC Shift: Why Banks Stopped Lending After the 2008 crisis, regulatory frameworks like Basel III tightened lending standards and increased the cost of risk-weighted assets for banks. Traditional lenders retrenched to low-risk loans and sectors, and loans that once supported SMEs and mid-market borrowers became less attractive. This retreat created a gap for businesses too small for bond markets but too big for venture debt. To help fill this void, non-bank lenders and private credit funds have emerged. Institutions Are Flush, But Friction Remains Private debt global assets under management surpassed $1.5 trillion in 2023 and are expected to reach $3.5 trillion by the end of 2028, according to BlackRock. But capital outpacing deal flow is a growing issue in private markets. A report by Allianz focused on private debt and private equity suggested that record fundraising may begin to strain origination pipelines, and these funds could face pressure to deploy or return capital to limited partners, prompting new approaches to deal sourcing and risk-sharing. "Dry powder (uninvested capital) but also un-exited assets are set to remain at record levels in the coming years," the report said. However, it also noted: "Regarding PE fundamentals, current dry powder data indicates the challenge is not the lack of money ready for investment but the difficulties of finding good opportunities at the right price. This situation will likely drag on until the M&A and IPO market substantially accelerates and private equity capacity for distributions to investors recovers." DeFi And TradFi: A Blended Credit Model There's a hybrid finance model emerging in private credit that aims to help address funding challenges. It blends traditional finance (TradFi) and decentralized finance (DeFi). Here's how it works: • Senior Tranche: Between 70% and 85% is funded by large-scale institutions seeking secured, lower-risk returns. • Junior Or Subordinate Tranche: Roughly 15% to 30% is provided by DeFi lenders hungry for yield and willing to absorb first-loss risk. • Borrower Co-Investment: The borrower provides a smaller capital injection to align incentives and satisfy underwriting thresholds. With this structure, DeFi lenders can benefit from co-lending alongside multi-billion-dollar institutions that have conducted deep due diligence. TradFi lenders can benefit from downside protection via subordinate DeFi capital that absorbs early losses. And borrowers, or asset/credit originators, can receive full funding, even without posting 20% upfront. This hybrid approach is already live. For example, Kasu, an RWA lending platform I founded, is facilitating deals where DeFi fills the first-loss capital and TradFi institutions fund the senior tranche. Others exploring models that bridge DeFi and TradFi include Centrifuge, Maple Finance and Goldfinch. Where This Is Going The convergence of DeFi and TradFi could reshape how capital is structured, risk is allocated and credit is underwritten. I expect to see future developments such as: • Tokenized credit instruments tradable on secondary markets • Risk-tranching protocols that match yield profiles to investor preferences • Collaborative underwriting across decentralized autonomous organizations and institutional desks • Real-time, on-chain data rooms for diligence and monitoring But while the opportunity is immense, the path forward is not without friction. Challenges To Consider Regulatory uncertainty remains a top concern. DeFi-native platforms aiming to interact with institutional capital must navigate a fragmented global regulatory landscape. Questions around custody, know-your-customer and anti-money laundering compliance, and treatment of tokenized credit under securities laws remain unresolved in many jurisdictions. Without clearer regulatory frameworks, institutional allocators may remain hesitant to fully embrace these new channels, regardless of how compelling the yields might be. Operational complexity is another significant hurdle. TradFi institutions are built on legacy systems and hierarchical compliance processes. Integrating with decentralized protocols—especially ones that rely on smart contracts, open governance or crypto-native infrastructure—requires not just new tech stacks but also new mindsets. Finally, there's the human factor: trust and reputation. TradFi allocators are trained to work with counterparties they know, often over years of deal flow. DeFi, by contrast, is pseudonymous by design and rapidly evolving. Platforms looking to intermediate between the two worlds must go beyond technological innovation—they need to build durable relationships, compliance layers and reputational capital that satisfy the fiduciary standards of institutional investors. Add to this the transient and liquid nature of subordinated DeFi lending, and you have real challenges to overcome. Navigating these challenges won't be easy, but for those who do, the potential reward is significant: a financial system that is more composable, inclusive and efficient, with capital flowing more freely to where it's needed most. Conclusion Private credit has become a compelling post-crisis trend in global finance. But I believe its future lies not just in asset management boardrooms but also in smart contracts, decentralized capital pools and tokenized deal flow. As DeFi matures, it's becoming a legitimate funding layer for the real world. As TradFi seeks yield, it's increasingly willing to meet DeFi halfway—so long as risk is structured and aligned. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
