Despite long-term interest rates hovering near 3%, companies' funding needs remain strong, and they are working to contain costs and develop new sources of demand. Issuance activity is picking up, as illustrated by Sumitomo Forestry's public offering hybrid bonds.
Despite rising long-term interest rates, companies' funding needs remain firm, driven by capital investment and M&A, while demand for medium-term bonds is increasing in the corporate bond market. Issuers are shortening maturities, and investor preference for medium-term bonds is spreading.
Sumitomo Forestry issued approximately ¥250 billion in public offering hybrid bonds, attracting orders totaling nearly three times the issue size, according to Daiwa Securities, the administrative lead manager. The bonds carry an A rating, and the proceeds will be used in part to repay funds raised for the acquisition of a US company.
West Japan Railway gauged investor demand during the marketing phase and increased the issue size. Companies are increasingly using the corporate bond market as an alternative source of funding to bank loans.
The strength of overseas markets and the tapping of individual investors were also highlighted, with inflows into overseas corporate bond markets expected to continue. Japanese companies' dollar bond issuance is estimated to approach $100 billion in 2025.