Moody and Fitch have killed the hopes of Greece with Japan

Economic Death of Greece and the hope of Japan

In brief: Two credit ratings have done their dirty deed, and now neither Japan nor Greece would not be able to breathe calmly.

On the same day when the agency Moody downgraded the sovereign credit rating from A2 to Greece A3, the rating agency Fitch warned that the credit rating of Japan’s growing debt threatens the country. However, strangely enough, the latter may be a source of funds for the first.

While Greece will receive money from the European / International Monetary Fund, it also might try, as soon as circumstances permit, to raise funds from the market.

The Japanese government is actively engaged in the development of bond market “Samurai”. Bonds “Samurai” – are bonds denominated in yen, and issued by foreign corporate or governmental organizations. State-sponsored Japan Bank for International Cooperation (JBIC) provides safeguards to ensure the sale of bonds “samurai” for many developing countries – from Mexico to Vietnam, from Turkey to Uruguay. The task of JBIC – promote the use of the yen as an international currency. According to some estimates in the industry, sales of bonds “Samurai” in an emerging market could grow this year by a quarter – up to 350 billion yen (3.8 billion dollars). Last year, the share of bonds guaranteed by JBIC “Samurai” had about a quarter of the total market of the bonds, issuance of securities in which, after launching the program JBIC in May rose last year by 5 times. JBIC is considering to expand “opportunities for market access” for a wider range of countries and institutions, as well as an increase in funds allocated for this program.

For example, in late February, the Philippines received 100 billion yen in the form of a ten-year bonds, which are 95% secured bank JBIC, and its price into account the growth yield of approximately 85 bp above six months forward rate of the yen. Interest income from bonds amounted to 2.32%, while the yield on ten-year dollar bonds of the country reached 5.62%. Based on the traditional assumption that all proceeds are exchanged for dollars, the Philippines is likely to save about 50 bp debt service costs that during the term of the bonds is approximately equal to the annual cost per cent. Subject to the guarantees by JBIC such bonds, “Samurai” partially fulfill the function to ensure the creditworthiness of the Japanese Government. With this in mind, as well as increase liquidity in the market, it is not surprising that the spreads between Japanese government bonds and bonds of “Samurai” has a tendency to decline.

Ukrainian Globalist
2010-05-09 15:22, Economics.

News on: , , , , , , , , , , , , , , , , , ,

Post a comment