Global Capital Roundtable: Emerging Market Sovereigns in the Japanese Capital Markets

Global Capital, October 2015 

An evolution is happening in emerging markets’ use of yen funding. For many years, many of them have only been able to issue samurai bonds by using JBIC’s GATE programme, but steadily more and more of them are stepping up to standalone issuance. At the same time, benchmark borrowers from emerging markets are bringing along less established issuers from the same countries in their wake. By Chris Wright 

Participants

Bogan Klimaszewski, Deputy Director, Public Debt Department, Ministry of Finance of Poland

Juan Pablo Newman, CFO, Nacional Financiera, Mexico

Carlos Martabit, General Manager, Finance Division, Banco del Estado de Chile

Robert Pakpahan, Director General, Directorate General of Budget Financing and Risk Management, Ministry of Finance of the Republic of Indonesia

Alejandro Diaz de Leon Carrillo, Deputy Undersecretary for Public Credit, Ministry of Finance and Public Credit, Mexico

Vince Purton, managing director, Daiwa Capital Markets Europe

Moderator: Chris Wright, Global Capital

What trends are we seeing in samurai issuance from emerging markets?

Vince Purton, Daiwa: Historically the samurai market has welcomed emerging market credits. In recent years most of the issuance has been with the support of JBIC partial guarantees through the GATE programme. So in the last several years we’ve seen issuance from the likes of the Republic of Indonesia, Export-Import Bank of India,  Republic of Turkey, Central Bank of Tunisia and Development Bank of Mongolia, and, going back a little further, from  sovereigns such as Mexico, Panama, the Philippines, Colombia and Uruguay.

What we’ve now begun to see, with Mexico as the pioneer, is some of these countries graduating away from the GATE scheme and coming back with standalone issuance. We have recently seen Indonesia do a very successful multi-tranche structure involving a partially guaranteed tranche and two stand-alone tranches. You can clearly see that the strategy behind the GATE scheme, which is to get these credits back into the Samurai market with some initial support and then, over time, to support them in returning as completely stand-alone issuers, is working very well, as Indonesia and Mexico have proved. Turkey’s Y100 billion trade last summer was also interesting: it was still partially guaranteed, but there was clear progress there too towards stand-alone issuance. There was no guarantee on the coupon payments, just the principal, so clearly the size of the guarantee in NPV terms was declining. A standalone issue is clearly the next target for several other GATE programme issuers.

Why is this happening?

Purton: The logic behind investor appetite for these names – and this comes into any discussion on the yen markets at the moment – is clear. Domestically you have historically low rates, and you’ve got Abenomics in operation whereby the Bank of Japan is buying a lot of the JGB issuance, to the point where domestic investors are being squeezed out of that market and having to look for alternative domestic product. There is certainly a case for looking at credits in the samurai market as part of that core alternative domestic portfolio. With the search for yield on top of that, samurai product is likely to be of ever-increasing value and relevance.

So the search for yield takes people down the credit curve and along the maturity spectrum, and as it does so, it is opening up the market again for emerging market credits. We’re going to see more credits come this way, with the usual caveats that we need to have overall market stability first, and that investors will have strict minimum rating criteria in place.

Let’s hear from some issuers. Bogdan, Poland has been an active issuer in the past, but not recently.

Bogdan Klimaszewski, Poland Ministry of Finance: Since last year, there has not been any progress in terms of increasing our funding in Japanese yen. We haven’t been in the market with a samurai or any other format of yen issuance in 2014 and there is a weak probability of tapping the yen market this year. After redemption of July 2015 we have 13 outstanding issues.

It is not just yen. This year we have not been generally very active in the international markets. One reason is the high level of hard currency reserves on the Ministry of Finance accounts, and another –more strategic – is to reduce our indebtedness in hard currencies. Our goal is to decrease the medium-term share of foreign currency debt in total state treasury debt to 30% from its current level around 34%. That is why, when tapping the international markets, we are very much focused on the economics: tight pricing.

But Japanese investors are very important to us, and despite our lack of direct presence on the yen market we continue to actively develop relations with them by marketing our credit story and our local market. That is why at least once a year we do visit the biggest institutions in Tokyo, the last time in November 2014. It is extremely important to be in touch with Japanese investors, not only for potential samurai issues, but because by country they are the third biggest holders of our local currency debt (following local and US investors).

Their share of total non-resident holdings of our local currency debt, as of the end of June, was close to 13%. Therefore our policy is to keep a solid dialogue, meet them on roadshows, see them in our Ministry of Finance location and send monthly updates on the performance of our economy and developments on fiscal policy.

As far as the currency of issuance is concerned, our first choice is of course the Polish zloty – 70 to 80% of our issuance programme – and the second is the euro market, which attracts us with low yields and low spreads.

What would need to change for you to do another samurai?

Klimaszewski: Our presence in a particular market is the result of our policy of diversification of the investor base, the cost of funding, and our need to cover redemptions and interest payments, in hard currencies generally and in yen in particular. This year our payments in yen have been quite limited: we had the redemption of Y25 bn of retail bonds and Y9 bn of interest payments. Next year payments are quite similar in size and larger redemptions are due in 2017.

How much?

Klimaszewski: There are two issues, one maturing in May and one in November; 25 billion and 56 billion yen respectively, plus interest.

Where does yen issuance fit into Mexico’s funding today?

Alejandro Diaz de Leon Carrillo, Mexico Ministry of Finance and Public Credit: Going back to the Japanese markets has always been part of our long-term funding strategy, and we are committed to maintaining a regular presence in the yen market. This is highlighted by the fact that we issued two JBIC-guaranteed transactions in 2009 and 2010, then without the guarantee but JBIC participation as an investor in 2012 and 2013, and then in 2014 without JBIC participation. It has been a gradual process.

For us the yen market is an important source of funding. It diversifies our debt portfolio, and looking at how exchange rates move you can imagine how important that is for us.

This year was unusual, because we went to the euro market twice: first in a nine and 30 year format, including the first ever 30-year issuance from Mexico in the euro market; then, a few weeks later, our one hundred year bond in euros. That pretty much covered our financing needs from external markets for this year. But also, you might remember that last year in November we issued in the US market with pre-funding objectives in place. This time around we are likely to go through the latter part of the year with similar objectives. We tend to be quite open to market opportunities, and we could go for next year’s funding resources. So we are definitely very keen and looking at yen market conditions,

The 2013 yen transaction illustrates the benefits of having a presence in the Japanese market. Precisely when the tapering talks were happening and volatility in the dollar market was very strong, we went to the Japanese market, because it is less correlated with the other markets.

Your last deal was the 2014 samurai without JBIC support, including a 20-year tranche. What did that tell you about the possibilities of the Japanese market?

Diaz de Leon: It was very good news. It was a positive step to be able to print at 20 years. That was something that clearly was not expected before the transaction was launched, and it illustrates that some investors may be willing to extend duration to be able to achieve their yield targets. It conveys a powerful message: that investors are willing to look at, for example, Mexican instruments and go as long as it requires in order to get the return they are looking for. These are the consequences of some of the policies that have been in place in Mexico for some time, and the good outlook for the structural reform agenda in the next two years.

Should we expect to see you issue a samurai in 2016?

Diaz de Leon: Definitely. In fact we have not discarded the possibility of doing something in the yen market this year. If this year is not attainable for whatever reason, there will clearly be very strong interest next year. We want to have a regular presence in the yen market. We had to work for several years to attain the market access we have today, and we are definitely keen to keep that.

Juan Pablo, Nacional Financiera launched its first private placement into Japan this year. What role can these markets play for you, and for Mexico?

Juan Pablo Newman, Nacional Financiera: Nacional Financiera’s effort goes along with the Ministry of Finance. In 2009 the Federal Government opened the Samurai market with a private issuance of Y80 billion guaranteed by JBIC. The exercise was repeated in 2010 and finally there was a public placement without any kind of guarantee. Actually, in my former job at the Ministry of Finance I had the opportunity to be involved with the transactions I just described. I was able to translate this experience to Nacional Financiera, to understand the Japanese dynamics with investors, with the market, and with banks too.

Along with the Ministry’s strategy to diversify the investor base, to have resilient investors who want medium to long term exposure, and to diversify the currency exposure, Nacional Financiera placed a five-year Certificate of Deposit (CD) denominated in US dollars in the Japanese market through our London branch, from where we handle our CD Programme. That was our first success. With this programme, we have the flexibility to issue in almost any kind of market and currency, as long as it is fully convertible to US dollars, with a maximum tenor of five years in order to balance our assets and liabilities in a more efficient way.

What was the reasoning for a dollar deal in Japan?

Newman: Nacional Financiera works as a second floor bank to support SMEs, and works as a first floor bank to support important projects in terms of renewable energy, employment, social development and so on. Some of these are funded in foreign currency, mainly US dollars, and require long term financing. In order to cope with these requirements, our treasury strategy has been to increase the size of the programme from US$1 billion to US$2 billion, expand maturity, and diversify our investor base. Of course, we always take into consideration to maintain and reduce, if possible, the total funding cost.

At first, the CD programme was issued mainly in the short part of the curve, meaning three and six month issuances. Therefore, we wanted to extend our tenor, otherwise the deals just go round and round increasing our liquidity gap, which is now highly relevant to Basel III rules.  So we started issuing longer tenors.

On the other hand, the programme was very concentrated in just a small number of investors. We had investors in the US, in London and Mexico, but this type of investor was not looking at longer tenors. In this regard, Japanese investors were willing, because of their need for credit diversification, to look at the possibilities for a five-year deal. So we did this, a US$50 million placement through Daiwa, and it succeeded.

Since then, we have been in constant communication with Japanese banks and investors, looking at two possibilities: firstly, to replicate and increase the amount of what we did the first time; and secondly, to look at the possibility of issuing in Japanese yen. However, in our assets, we don’t carry yen exposure, so we always look at the cross-currency swap in order to make it competitive for us, in terms of our other funding sources.

Japanese investors invest not just in yen, but in US dollars, British pounds, and some of them in Euros. Now it has become a very important market for us. It diversifies our base, they are resilient to Mexican credit, they have appetite for longer maturities up to five years, and they build long-term relationships.

What comes next?

Newman: I think it will come in different paths. Nacional Financiera is a development bank, guaranteed by the federal government. As I said before, its mandate is to support SMEs, and to do some specific projects to foster Mexican development. We have seen interest from Japanese investors to participate in this kind of projects, through co-financing at longer tenors, providing technical assistance, and supporting Japanese companies investing in México like Nissan and Toyota, with whom Nacional Financiera already works alongside. So it is important to have better coordination and cooperation with private and public Japanese entities in this regard.

The next step is for Nafinsa to continue exploring whether to return to the Japanese financial market, the private and public markets. Our last public offer on the international market in foreign currency with a bond was in 1997. We will see if there is an opportunity to issue in Japanese yen, maybe with a different format: it won’t be a CD, but maybe a bond, perhaps denominated first in dollars and euros and later in yen. And finally, we will try to bring Japanese investors to invest in the local market.

Is it correct that NaFinsa has its own Memorandum of Understanding with JBIC? How will that affect you?

Newman: Yes, we signed the MoU last year. We are exploring the possibility, alongside JBIC, of jointly supporting sustainable green projects. Also, we would like JBIC to help us explore the appetite from Japanese investors, commercial banks and companies to invest in our country, whether in this kind of project, green projects with longer tenors, or some others.

Carlos, Banco Estado was the first Chilean bank to launch a bond in Japan in 2013, and has since done so again.

Carlos Martabit, Banco Estado: Yes, our Y24 billion deal in 2013 was the first time a Chilean institution had issued in the Japanese markets. There are a few issuers in Latin America that can go to Japan – CAF (Corporacion Andina de Fomento, the Development Bank of Latin America), Cabei (the Central American Bank for Economic Integration) – but they are multilateral institutions that have issued.  We were the first Chilean institution, and we opened the market for other Chilean banks and companies. When you go to investors, you begin to explain about Chile, about its macroeconomics, its situation in general.

Was it successful?

Martabit: It was very successful. We were very happy with that deal, and we have since followed it with another one in January 2015, both with Citi and Daiwa.

The first deal had a coupon of 0.837%. It was a Y24 billion five-year euroyen deal off an MTN programme, priced at 35 basis points over 5-year yen mid-swaps, and was increased in size from Y20 billion during marketing. The second had a coupon of 0.52%, a very good outcome for us. That deal raised Y31 billion in five-year euroyen funding, at 30 basis points over 5-year yen mid swaps. It was the euroyen offering with the lowest coupon and tightest spread in the yen market by a Latin American issuer, and the largest single tranche euroyen issue from Latin America.

Pak Robert, Indonesia launched a landmark deal this year: partly with a JBIC guarantee, partly –for the first time – without. How do you feel the deal went?

Robert Pakpahan, Ministry of Finance of the Republic of Indonesia:

It went well and received some quality demand from investors, which shows Indonesia’s well-perceived status among Japanese investors.

How important was it for Indonesia to issue in its own name and without a guarantee, at least on some of the paper?

Pakpahan: It was important in terms of creating further relationships with investors directly by issuing in our own name, which will broaden the investor base and benefit our funding opportunities in the future. Investors will get used to holding paper in our own name.

How do you expect to use the Japanese capital markets in future?

Pakpahan: We would like to maintain the good relationship with existing investors, and build a good relationship with potential investors to enable access to the market if we see the opportunity. We will maintain our presence in the market to enable the RoI to establish a benchmark curve in the Japanese capital market, as well as to diversify our investor base. We will also look forward to the opportunity to eventually issue samurai bonds with our own name through public offering.

What diversity do the Japanese markets offer Indonesia?

Pakpahan: In terms of diversification of funds, Japanese markets have been fairly stable even when other markets are seeing high volatility, which gives us a stable funding opportunity. The Japanese market also provides other sources of financing, reducing the reliance on the dollar and euro pockets.

Vince, when a credit issues first with a JBIC guarantee and then without, are they reaching new investors, or is it the same people buying?

Purton:  At least for the first trade there are some investors who are only looking at these credits because of the credit support involved, but the investor base rapidly widens with repeat issuance so that, by the time of stand-alone issuance, the potential universe of investors encompasses most of the major investors in the market, such as the big Tokyo and most prominent regional accounts. Of course many of these will have strict minimum rating requirements for any investment, and hence their ability to buy a specific credit will be determined by that.

Has the samurai market proven itself this year, through the Greek crisis, as truly differentiated?

Purton: There was a time before the summer when you had a complete dearth of issuance in the euro market, largely because of the Greece concerns, and yet we saw five or six samurai trades being done at cost-competitive rates and very big size. Credit Agricole launched their largest ever samurai; Lloyds the same. The market empirically showed its worth by staying open and competitive.

This all feeds into the huge importance for issuers of building and maintaining a globally diverse investor base. In good times, an issuer can then look at the relative arbitrage between markets and choose the best one, whereas in challenging times it has the added comfort that if certain markets are closed there is a strong likelihood that other markets will still be open. The Samurai investor base is complementary to that accessed by other currency issuance and increasingly granular within Japan, and hence it offers a very valuable safety net.

What is the attraction of local markets to Japanese investors?

Klimaszewski: There are several elements. Poland, since the beginning of its economic transition, has been on a continued growth path without any recession, with an expanding and well balanced economy. It is diversified in terms of its drivers of growth and it is catching up very fast with advanced countries, with responsible fiscal policies and a substantial reduction in the deficit.

All these factors are reflected in a good evaluation of our credit, which is confirmed by inflows from stable investors like central banks or Japanese institutions.

Another element is the attractive level of yields. Compared to Japanese markets, yields in Poland are much higher, and there are expectations that the currency could appreciate in the medium term. So the profits for investors coming into our local currency market are obvious.

The third element is the transparent, liquid and well-organized local bond market. Even if there are any unexpected external developments, the market has proven still to be liquid and every investor may feel comfortable they will get a price from our primary dealers.

Interest of Japanese institutions in our paper is quite widespread along the yield curve.

How about Mexico?

Newman: Japanese investors are starting to look at Latin America, and more precisely Mexico, which has very strong economic fundamentals. I think we are starting to become a well-known credit, and we are differentiated from other emerging economies. As a development bank, it’s not just about us having contact with them; it’s a chance for others, private and public institutions, to open a different market, to explore these markets and have more competitive issuance for their liabilities. The Ministry of Finance opened the door, other public entities like ourselves are also now doing something with that market, and these actions have transferred appetite for other entities to look at it too.

And is it still the case that Japanese investors are interested in Mexican local currency issuance?

Newman: Absolutely true. In 2010, the Ministry of Finance succeeded in getting their local bonds, denominated in pesos, to become part of the WGBI, the World Global Bond Index. Since then a lot of Japanese investors actively and passively act according to this index, and also directly. This is the way the Mexico name was introduced to these kinds of investors. Increasingly, those investors are looking at more Mexican entities than just the Ministry of Finance or the federal government; now they are looking at other private companies. For example, America Movil issued in the samurai market in 2012.

Diaz de Leon: There are dedicated investors that follow our local debt issuance and that seek to diversify their investments through it. That’s why, when we do roadshows in Japan, we try to speak both to traditional samurai investors and also to the ones that diversify more broadly globally and have a significant stake in our local currency bonds. Clearly the last months have been quite volatile, but our investor base has been resilient. We have tried to enhance and maintain our macro strategy, and the key anchors in fiscal and monetary policy, so combined with our structural reform agenda it puts us in a position of being a very attractive emerging market where people want to put their money.

How much Mexican local currency debt is held by Japanese?

Diaz de Leon: It is very hard to tell. We have bank secrecy regulations that do not allow us to know the name of every holder of our instruments. But what we have seen is significant interest, both when we visit Tokyo and when we receive investors here. It is difficult to pinpoint a concrete figure but we have seen more funds that invest globally including Mexican peso instruments in their holdings.

How about local paper from Banco Estado in Chile?

Martabit: They buy our 144a registered dollar issues and our CDs; they can buy our CDs through our New York.

What do Japanese investors like about the Indonesian credit story?

Pakpahan: Japanese investors respond positively to the ROI’s fiscal and monetary policy reform. On the fiscal side, investors’ concerns focus on energy subsidy reform for fuel and electricity. This reform has led to government budget savings. Associated with efforts on the reallocation of energy subsidies, investors are also concerned with the government plans to increase the budget allocation to infrastructure, particularly in relation to the increase in national food production (food security) and transport infrastructure (distribution). With all the investor interest and positive response, it proves that our credit story has been well accepted by Japanese investors.

And do Japanese investors participate in Indonesia’s non-yen paper?

Pakpahan: It seems we have limited information on Japanese investors who have purchased our non-yen paper. However, some Japanese investors visiting our office inform us that they have purchased ROI US dollar global bonds and IDR bonds.

Alejandro, we have heard from NaFin, and there are also other issuers like Pemex that have looked to issue in Japan. How influential are you in creating a curve and a benchmark for other Mexican issuers?

Diaz de Leon: As part of our goals in the market, not only do we want to be a frequent issuer, but we want to open the market for other national issuers. The obvious candidates are the development banks or Pemex, but also some private sector participation. The Japanese market requires a little bit more time and effort than some, but definitely Pemex and the development banks would look at that market as a good alternative.

How is cost stacking up compared to other markets at the moment?

Newman: Well, rates in Japan are still very low in comparison to other developed economies. At the moment, with the swap, it is a bit higher than our foreign yield curve, around 30 to 40 basis points, but these circumstances change every day, so we are always tracking the market. Although we look at the cost, it is very important to have more resilient investors, now that volatility is widespread. Japanese investors tend to be more medium to long term.

Carlos, what do you see in the swap?

Martabit: We swap our deals. Today, it is not convenient. Today Japan is near to the levels for our commitment, but not quite. There are two or three currencies that are near to our objectives.

And for Indonesia? How have costs in the Japanese markets compared with other markets you use?

Pakpahan: The cost for this market is fairly competitive compared to other markets.

How important is the swap rate when you consider issuing?

Pakpahan: It is one of the important factors we consider in calculating the RoI cost of samurai bond issuance. Although currently we do not swap out cash proceeds, in the future it is possible. This means the swap rate will become more important in future.

Vince, emerging markets are struggling right now. How will that affect Japanese appetite for emerging market credit, and those credits’ appetite for issuance?

Purton: Japan will always look at these credits on a bilateral basis, rather than generically; it’s a case by case analysis. The credits that have used the credit support structures in recent years benefit from having a more contemporary dialogue with Japanese investors, and that will help. For credits that have issued in the past and are therefore part of the samurai bloc and have name familiarity, the door will always be open for a discussion. And there is always interest in looking at new names with a good story to tell. Of course precise timing of any deal, and the parameters available, will depend in part on having some core stability in the global markets.

What’s the best tenor for these issuers?

Purton: You have a divide here. If you are looking at JBIC support, the standard tenor has been 10 years. If you are looking at standalone issuance with the same credit, you tend to focus on shorter tenors, typically three to five years, for core demand. On the other hand, Mexico very successfully tapped some demand at super-long tenors beyond 10 years, so there can be pockets of selective demand right along the curve, albeit in limited size.

As for pricing stand-alone issues, one reference point with these markets is to look at where the secondaries are in other currencies, dollars and euros, and refer that back into a Yen-libor equivalent . That’s the starting point, alongside a comparison with other recent primary issuance, and whether a premium has to be paid, and how much, depends on global market conditions at the time – and remember that new issue premia may also be required in non-yen markets too. The basis swap is obviously fairly volatile and not particularly conducive to yen issuance, but on the other hand those secondary spreads in euros and dollars have been widening out recently, hence the net result is that the Yen spreads available are still attractive.

What is the key to successful investor relations and roadshows?

Klimaszewski: We know the accounts investing in Polish zloty because we are in touch on an almost daily basis with various groups of investors and we cooperate very closely with our primary dealers. On our roadshow last year, the organization of the roadshow was given to those banks who have a strong position in encouraging Japanese investors to invest in the local currency market. Last time, the roadshow was limited to the Tokyo institutions.

We have been present on the yen market since 2003 and rated by the Japanese rating agency on a regular basis, so investors are familiar with our credit.  They also appreciate the personal relations with the Ministry of Finance and the central bank. We tend to visit Japanese investors once a year, with a high-level delegation travelling to Tokyo and sometimes other cities.

Diaz de Leon: We try to keep very close relations with investors. We try to do a roadshow once a year so we can keep them updated with all the events and relevant issues we have here. That has been very useful, because they know the characteristics of our economy, and it is always good to keep them well informed about what we are doing here. That way, when they read the headlines on their screens, they have a context for what is going on.

Pakpahan: We have conducted several IR activities in Japan and it is always the key to have an ongoing relationship with investors, maintaining communication and face to face meetings, in particular with the involvement of the Minister of Finance in the investors’ meeting in Japan.

Newman: It is another kind of culture, but I would say the key is instilling confidence. They are not just looking at cost. We have learned they do their homework. They analyse credit in a very precise way, and they are always in touch with the credit they buy. So it is not just about buying the paper, but establishing a relationship with the entities. That differentiates them from other kinds of investors. So it is very important to be transparent, to be direct with investors, to be consistent on the programme you announced, and to establish a long-term relationship.

Martabit: The best idea when you are looking at the Japanese market is to have a long-term relationship with them. Go to visit them each year, whether you have an issue or are not going to issue, to have a permanent relationship with them. Japan is a very important economy in the world: the capital markets in Japan and the investors there are highly qualified. They study issuers closely. Their work is very good. Myself and my team go personally to Japan frequently to explain about the Chilean economy, about the financial system and Banco Estado.

Are the Japanese familiar with Chile?

Martabit: They know about Chile because there are very big Japanese companies that have investments here. Our principle export is copper, and the Japanese buy a lot of copper from Chile.

Do you need to travel there?

Newman: Yes. I think they consider, culturally speaking, that being face to face helps to bring confidence. They want to establish a relationship. It’s important for Mexican entities, private or public, always to be present in these markets, and present does not just mean publishing our balance sheet. It means having conversations with them, telling them about financial programmes, your future plans and projects.

Do you coordinate your investor relations with the Ministry of Finance?

Newman: The Ministry of Finance has succeeded in not just selling their credit but promoting Mexico Inc. Public entities are in constant touch with them to coordinate and exchange ideas on the macroeconomic framework, the several reforms that our country has carried on recently, the market dynamics, policies, etc. That is very important: to help us understand perfectly what’s going on in Mexico and what the role is for your specific institution.

Who buys your paper? How widespread is the investor base?

Martabit: We had 15 to 20 investors in our deals. There were regional banks, institutional investors, insurers, life companies – many different investors. They have very good analysts, very good research. It’s not that they are just interested in your rank or your rating, you need more than that.

Having done JBIC and non-JBIC deals, do you see the investor base changing Alejandro?

Diaz de Leon: What we have noticed is that the investor base has got significantly broader. In the time that we have had open presentations to investors, at the beginning it would be a large room at half capacity, and last time it was full. We have seen more awareness and more interest from a broader investor base, and we have seen that translated into our book.

Purton: In the overall samurai market you are certainly looking at an investor base that is much more granular than it was when we last had a lot of sovereigns issuing. Yes, there are the big Tokyo accounts, who remain key supports and provide the bulk of the total volume, but there is growing regional uptake on trades as well. Our most recent analysis showed that of the 47 prefectures in Japan, we have sold samurais to 45 of them in the last year. We offer real nationwide distribution capability. Each regional order tends to be small, but the large number of orders can still make an impressive impact on the total book.

What is the impact of Abenomics from your point of view?

Diaz de Leon: Abenomics is about several things, one of which is about monetary policy. That has created some opportunities for us to broaden our international market presence. Similarly in Europe this year, monetary stimulus allowed for a particularly strong appetite for long tenors, even ultra-long tenors, in that currency. Something similar has happened in Japan: stimulus has allowed some investors to move into longer tenors than they probably would have done otherwise, and that brings an opportunity for issuers to consolidate our presence throughout the yield curve.

Klimaszewski: The Abenomics policy, and the central bank input to this policy, of course contributes to the search for yield by Japanese investors, and causes them to look at other markets, especially local currency markets. The ECB’s quantitative easing has quite a similar impact for us.

Pakpahan: Abenomics has made Japanese Government Bonds yield at a low level, below investor target return expectations. This condition has prompted Japanese investors to take into consideration selected asset classes that provide better returns, regardless of its rating below single A.

Newman: We’re not totally removed from global behaviour, but does it directly impact us? Mexico has very strong fundamentals at the moment and we don’t have any kind of fiscal or commercial imbalances. So we are aware of what’s going on in Asia – not just in Japan, but in China – and the effect it has globally. But at the moment, Mexico benefits from it.

Carlos, will Banco Estado do more deals in Japan?

Martabit: Of course, if the conditions are appropriate. Our policy has always been to diversify our liabilities all over the world. It is very important to do that. We are looking at all the markets we can issue in, and we monitor them practically daily. If the conditions are good, then we can launch. We have a close and constant contact with Japanese investors.

Is there much of a pipeline from emerging market issuers?

Purton: We are seeing a lot more interest from target issuers than in recent years. The fact that it is a complementary investor base, the fact that the market has shown itself to be open when others were not – these are strong positives for emerging market sovereigns.

Here in Europe, we are having active discussions with more credits than we have been for a long time: there are several names, both familiar and new, whom we believe could issue in the market over the next 12 months. I see the samurai option as being very much on the table for the 2016 funding programmes of many more issuers than in the past.