Japan's hybrid bond issuance is recovering as yield-seeking investors and
borrowers seeking acquisition and refinancing funds without equity dilution
return to the market. Higher yields and relatively wide spreads are attracting
demand for subordinated hybrid debt, and rating agencies are granting partial
equity credit to some issues. Despite higher interest rates, issuance in the
fiscal year to Sept is expected to reach about ¥1.18 tln, the largest since
FY2021. Nomura senior credit analyst Kazuma Ogino said corporate earnings remain
broadly resilient and market credit concerns are limited; many bonds carry
first-call options around five years, and expected calls would help limit
investors' long-duration rate exposure, supporting demand.
