Since last week, we have noted the flood of fresh JPY issuance and Samurai issuance that has recently emerged taking JPY issuance as a proportion of major global currency issuance to fresh highs for the year this month, at almost 4% and while still at low levels, these are the highest since 2005.
A rise in issuance usually correlates with a stronger currency performance, and would be a factor in recent JPY gains. The fact that USD issuance has surpassed EUR issuance this month for the first time this year is seen reflecting USD demand and helping the USD rebound.
The Nikkei takes a different tact on the flood of Samurai issuance however, which at Y502.8 bln this month is the largest since Sept 2000 with the Nikkei seeing the issuance fuelling JPY weakness as the issuers shift the proceeds of the bonds to other currencies such as the USD and EUR. Today, Kaupthing Bank was the latest to launch JPY denominated debt, with three tranches totaling Y28 bln.
The Nikkei report says that Samurai issuance the first six months of this year has surpassed the record highs during the first half of 2000. Expectations of higher Japanese rates are attracting debtors to lock in low yield costs. Thomson Financial data on issuance can be found on our website at www.ifrmarkets.com. Look under "Macro Flows" and click on "Issuance" which will bring up the latest PDF file on issuance flows year-to-date.
USD/JPY is continuing to grind higher, filling the offers at 122.50 and now trading at 122.55/60. More sellers are seen at 122.75. A steady rise in US bond yields, and with the DJIA paring losses to only 8 pts this morning, is behind the bounce in USD/JPY.
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