Warren Buffett’s company Berkshire Hathaway is preparing to sell yen-denominated bonds in Japan. The company is considering selling seven different bond maturities, including 30-year bonds. The initial pricing guidance for the 30-year bonds is around 95 basis points above mid-swap rates.
Mid-swap rates are a key benchmark for corporate debt in Japan. Berkshire plans to finalize the bond sale pricing as early as October 10th. Buffett has used money raised from previous yen bond sales to buy stakes in Japanese companies.
His investments in Japan’s major trading firms helped push the Nikkei 225 stock index to a record high earlier this year. Selling yen bonds now aligns with falling Japanese corporate and government bond yields.
Berkshire Hathaway’s yen bonds strategy
Yields have dropped as expectations for further interest rate hikes by the Bank of Japan have diminished. Japan’s new Prime Minister Shigeru Ishiba recently suggested the economy is not ready yet for more rate increases. As a result, many economists have pushed back their forecasts for when the central bank may next tighten monetary policy.
The guidance on spreads for Berkshire’s new yen bonds is mostly wider than what the company offered on a previous yen bond sale in April. For example, Berkshire is now looking at a spread of about 80 basis points on a 10-year bond. In April, the spread on that maturity was around 70 basis points.
The wider spreads reflect shifting dynamics in Japan’s interest rate environment. Berkshire’s yen bond sale is being closely watched for clues on Buffett’s future investment plans in Japan.
