A Y40 billion ($281 million) public offering in the domestic Japanese yen market of "Daimyo" bonds of the International Bank for Reconstruction and Development (the World Bank) was announced today. The 4-5/8 percent bonds, priced at 101 percent, will have a final maturity of 10 years to yield 4.45 percent on a semi-annual coupon equivalent basis. The bonds will be known as Daimyo bonds due to special features which differentiate this new instrument from "Samurai" bonds, the traditional yen issues by non-residents in Japan.
The features that are new to the domestic yen markets are intended to enhance the liquidity of domestic yen-denominated bond. The issue also bears many similarities to a Euroyen transaction but will not be subject to the three months restriction on purchases by domestic Japanese investors that is applicable to Euroyen bonds.
Foremost among the Daimyo bonds' special features is that the settlement of trades can be conducted through the Euroclear and Cedel clearance systems. These two international book-entry clearance systems have boosted the efficiency and liquidity of the Eurobond market by simplifying the transfer of securities. Second, the Daimyo issue will be listed on the Luxembourg Stock Exchange. It is also expected that the managers of this issue will make a market for the bonds in Tokyo and that trading will take place in both the Euromarket and the Tokyo market, thereby integrating domestic and foreign demand for Japanese yen bonds. Third, for the first time market makers in Japan will be allowed officially to take short positions on a contract basis for up to 20 days. Fourth, the bonds are being underwritten by an international management group. Fifth, interest will be payable annually instead of semi-annually.
Further, like the World Bank's most recent domestic yen and
Euroyen issues, this issue can be reopened in the future. The reopening provision will enable the size of the issue to be increased through further offerings having the same maturity and coupon rate.
The offering is being made through a syndicate of 20 Japanese and foreign securities firms headed by Daiwa Securities Co. Ltd. The agreements will be signed tomorrow in Tokyo.
