Japanese Prime Minister Shinzo Abe’s plan to review Japan’s zero-nuclear policy helped push bond sales by utilities to the most since the March 2011 earthquake left all but two of the nation’s 50 reactors idle.
Kyushu Electric Power Co led ￥150 billion (US$1.6 billion) in offerings by atomic energy producers last month, according to data compiled by Bloomberg. That is the highest level since May 2010.
Japanese utilities pay 0.74 percent to sell debt, compared with an average 0.55 percent for the country’s companies and 2.61 percent for companies worldwide, Bank of America Merrill Lynch indices show.
Abe told the National Diet (Japan’s bicameral legislature) last week that he will resume Japan’s reactors, which once supplied about a third of the country’s electricity, even as the approaching second anniversary of the quake stirs memories of the worst nuclear accident in a quarter of a century.
Utility bonds are attracting investors on improved prospects and higher returns amid the lowest corporate yields since June 2005, the Bank of America Merrill Lynch bond index shows.
“Frankly speaking, there is little else to buy because yields are so low,” said Tadashi Matsukawa, who helps oversee US$1.5 billion as head of fixed income investment at PineBridge Investments Co in Tokyo.
“The market is convinced of the government’s unspoken support for the industry,” he added.
Kyushu Electric’s ￥60 billion of three-year notes offered on Feb. 22 had a coupon of 0.65 percent, or 60 basis points more than similar maturity government debt, data compiled by Bloomberg show.
The sale is the largest ever for the 62 year-old company based in southern Japan.
The spread is compared with 9 basis points the utility paid for 0.35 percent notes offered three months before the quake, the data show. Utilities globally pay a yield premium of 140 basis points, the Bank of America Merrill Lynch index data show.
“Looking at the trend, we decided it was a good time to issue,” Kyushyu Electric Co spokesman Hirotake Kakehashi said.
“We anticipated sufficient demand in the market,” he added.
Hokuriku Electric Power Co, which serves the region along the Sea of Japan, was the last utility to sell bonds last month raising ￥20 billion of 1.158 percent 10-year notes at a spread of 47 basis points, according to Bloomberg data. The gap is 7 basis points wider than the previous offering in the tenor in August, the data show.
Japan will restart atomic power plants once their safety is reassured, even as the government seeks to reduce reliance on nuclear power as much as possible through energy-saving efforts and a shift to renewable sources, Abe said in a policy speech on Feb. 28.
His stance marks a turnaround from his predecessor, former Japanese prime minister Yoshihiko Noda, whose Democratic Party of Japan (DPJ) was voted out in December last year. The DPJ pledged to cut Japan’s dependence on atomic power to zero by 2030, after the worst nuclear disaster in more than two decades led to all 52 of the country’s nuclear reactors being shut down temporarily.
“The biggest reason for the spate of utility bond sales is the government change,” said Hisashi Hatta, director of investment at AISIN Employees’ Pension Fund, which oversees nearly US$1.8 billion of retirement money at Aisin Seiki Co, a parts maker for Toyota Motor Corp.