The Federal Reserve has seemingly lost control of its 10-year Treasury Note. Rather than follow The Fed’s quantitative easing/ tightening, the 10-year Treasury Note yield is following trade patterns.
And speaking of losing control, a Japanese lender is planning to issue a 0.99% JUNK BOND.
(Bloomberg) — Japan’s negative interest rates have upended many conventions in the local credit market and another is set to be broken on Friday when the nation’s first publicly offered junk bond may price — at the super-low interest rate of 0.99%.
Aiful Corp., a consumer lender that teetered on the edge of bankruptcy a decade ago, is planning to sell the 18-month note with speculative-grade ratings. The planned coupon would be the lowest for any outstanding junk fixed-rate note in the world, according to data compiled by Bloomberg, and pales in comparison with rates above 10% on some dollar securities sold by Chinese issuers this year.
One percent on a junk bond may be unthinkable in other debt markets, but by Japanese standards it looks pretty good. Two-year local government debt yields are at about minus 0.16%, and a 50-year yen corporate bond priced this year at a little over 1%.
Well, when Japanese 10-year sovereign yields are negative (and even the Yen swaps curve is negative at 6 years), it is not that strange that “high yielding” junk bonds are the next move.