MUFG raised ¥200 billion through two perpetual, callable AT1 tranches that can be called in five years four months and in 10 years four months. Coupons were fixed at 100 and 105 basis points above the government bond curve, respectively, which came 5 basis points tighter than MUFG's April sale. The tighter prints highlight how buyers are leaning into subordinated bank paper. Mitsubishi UFJ Morgan Stanley Securities led the deal.
Richer coupons are doing the heavy lifting in a market awash with issuance. Hodaka Kimata, executive director in debt syndication at Mitsubishi UFJ Morgan Stanley, said AT1s are liquid and widely issued, which makes them easier to buy. "The market's momentum has been toward wider spreads, so there was some impact, but the bonds remained popular as a megabank name," he added, citing final demand of ¥248.2 billion for MUFG's AT1s.
Even highly rated names are paying up a bit in senior format. In August, Itochu's five year spread was 29 basis points, up from 20 in May. For Isuzu, the five year spread reached 43 basis points, higher than 38 in January.
Across the market, a Bloomberg index of yen investment grade corporate bonds registered 47 basis points on Sept. 10, up from roughly 45 in April. Japanese companies sold more than ¥10.7 trillion of yen bonds through Sept. 11, running over 10% ahead of last year's pace and marking a record for that time frame.
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If you are shopping for income, this is the trade off today: senior debt is paying a little more than earlier in the year, but many buyers are stepping into subordinated bank paper from big names to grab extra yield. The crowd's interest in megabank AT1s like MUFG's shows where investors think the risk and reward still line up.
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