In Tokyo, world's first sovereign
transition bonds make their debut
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[February 14, 2024]
By Junko Fujita
TOKYO (Reuters) - In a world first, Japan auctioned sovereign climate
transition bonds on Wednesday although the bonds met with slightly
weaker-than-expected demand. |
Japanese Prime Minister Fumio Kishida attends a bilateral meeting with
Kenyan President William Ruto at the prime minister's office in Tokyo,
Japan, Thursday, Feb. 8, 2024. Shuji Kajiyama/Pool via REUTERS/File
Photo |
Climate transition bonds are a relatively new class of bonds
which aim to fund shifts by companies, or in this case a
government, to having a lesser impact on the environment. They
are distinct from green bonds where the proceeds are earmarked
for a specific project or are focused on the profile of the
issuer.
The sale of 800 billion yen ($5.3 billion) in 10-year transition
bonds was the first in Prime Minister Fumio Kishida's plan to
sell 20 trillion yen of climate bonds over the next decade to
help the nation with its goal of cutting greenhouse gases to
zero by 2050.
The proceeds are expected to go towards projects such as
low-cost wind power generators and airplanes that use
alternative fuels.
The bonds were priced to yield 0.74% on Wednesday, with pricing
somewhat lower than expected. Yields on the bonds were 0.655% a
day earlier in the so-called "when-issued" market, which is a
market for securities yet to be issued. Yields on bonds move
inversely to prices.
"I would say expectations prior to the auction were too high.
Still the yield on climate bonds was little lower than the yield
for 10-year JGBs, which means the bonds enjoyed a premium," said
Keisuke Tsuruta, a fixed income strategist at Mitsubishi UFJ
Morgan Stanley Securities.
Regular 10-year Japanese government bonds were yielding 0.755%
on Wednesday.
Japan's finance ministry plans to sell 800 billion yen of
five-year transition bonds on Feb. 27, which will be followed by
1.4 trillion yen of transition bonds in the fiscal year starting
in April.
($1 = 150.52 yen)
(Reporting by Junko Fujita; Editing by Edwina Gibbs)
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