Toyota joins list of failed bond sales in Japan corporate debt

Toyota failed to sell its longer tenor bond primarily due to investors’ expectations of higher returns. (Reuters pic)

TOKYO: Toyota Motor Corp. failed to sell all of its longer-tenor debt after returning to the market for the first time in two years, becoming the latest in a series of bond-offering stumbles in Japan’s corporate debt market.

The reason for the lack of demand was mainly due to investors’ hunger for higher returns, rather than any question over the automaker’s creditworthiness, people with knowledge of the matter said. The No. 1 Japanese carmaker was seeking to sell five- and 10-year debt on Friday, carrying coupons of 0.05% and 0.15%. The 10-year bond failed to attract enough bidders, said the people, asking not to be identified because the information isn’t public.

Toyota had raised the amount of each debt issuance by about 10 billion yen (US$91 million) to 30 billion yen for the five year, and 20 billion yen for the 10 year. By comparison, East Nippon Expressway Co. successfully sold a 10-year bond in April with similar rating and terms, with coupon of 0.21%

The failed bond sale is the latest sign of trouble in Japan’s over 70 trillion yen company note market. Bloomberg reported in October that underwriters in Japan failed to fully sell at least 29% of corporate debt offerings in September, twice the average over six months, based on interviews with investors, underwriters and issuers.

Underwriters reported to Toyota that the bonds were sold out with excess demand, a spokesman said.

Underwriters misjudged the market’s appetite for higher yields, one of the people said. In March, Japan Airlines Co. successfully sold five-year bonds carrying a coupon of 0.22%, after it failed to sell longer-tenor notes in 2018