Domestic Publicly Offered Senior Bonds
Policy of issuing Senior Bonds
- Seeking High Liquidity - regular issues
Considering the liquidity of our bank bonds, we have showed a total issue amount for the half-year and will implement issues on a regular quarterly basis, making it easy for investors to plan an investment schedule.
- Regular issues centered on mid-term bonds
Matched to the mid-term zone, thought to be the deepest level of investors, we will regularly issue 3-year and 5-year bonds.
- Spot issues ... long-term and extra-long-term bonds also issued
In addition to regular issues, we have decided to have spot issues in response to market conditions, and the demands of investors. In particular, we have issued 10-year and 20-year bonds in response to the need for long-term investments.
- Pricing based on market considerations
Taking a long-term view, we believe it is important to receive acceptance by investors to the issue interest level. For that purpose, issue pricing will not follow the underwriting syndicate bid format, but will take a stance that places importance on market conditions, by using the JGB-related spread format, as a basic rule, for syndicated underwriting.
Object of issuing Senior Bonds
For the bank as an issuer, we believe that bond issuance has the following meanings:
- Funding Alternative
Using bonds as a stable source of mid- to long-term funds and increasing funding methods is an important point for ALM management.
- Interest risk management
Also from the point of view of interest risk management, we think that the issuance of bonds has great importance. In the case of a city bank, while procurement of funds such as deposits and CD is centered around short-term products, loans (investment) include many mid- to long-term products like housing loans whose terms, in many cases, exceed 10 years, and, as a result, a long-term/short-term gap occurs. In the past, long-term funding methods for a city bank were limited, and interest risk was managed with interest rate swaps and other means, but with bonds, risk can be directly and efficiently controlled.
Also, unlike deposits, bonds can be expected to provide fixed funds that are not subject to early termination prior to maturity, and it is not necessary to consider costs arising from the so-called option characteristic. For these reasons, we believe that the issue of bonds contributes not only to the efficiency and stability of ALM, but to product design and planning for mid- to long-term loans that match the needs of customers.
- Liquidity risk management
Until recently, for city banks and other major banks in Japan, it was usual to raise large funds using extra-short-term methods, such as overnight calls, but after experiencing financial system instability, the recognition of liquidity risk has exploded. With bonds and other mid- to long-term funding methods, liquidity risk can be reduced from the point of view of reliability of the funds until maturity.
Recently there has been a trend to increase products aiming to reduce mid- to long-term liquidity costs such as mid- to long-term commitments or back- up lines, in response to customers' needs for such products. From the point of view of the stable provision of such products, it can be said that the expansion of the domestic market of bank bonds has deep significance.
- Creating our bank yield curve
One of the important goals of bond issuance is to format credit risk term structure formatting in response to terms. We have been issuing bonds in various terms, which indicates a yield curve that reflects our credit risks.
For a financial institution, it is extremely important for management to accurately grasp the market value of its own credit risk, and bonds are useful for raising capital appropriately.
Also, although credit derivatives have been penetrating the markets, since there has not been a bond (underlying product) in the bank sector on which judging credit risk is based, it can be said that the market for credit risk transactions has not been fulfilling its potential.
In this way, issuance of bonds with various terms and the formation of a credit risk term structure, including extra-long terms, has significance for us, and we hope that it will become a primer for rational pricing, such as the formation of broadly defined yield curves across rating levels and estimation and examination, of credit risk, applicable not only in the credit derivative market but in the issue and distribution markets overall.
Record of issues
The record of issues of our bank bonds is as follows:
- Record of issues