The first public offering in the United States of yen-denominated securities went on sale Tuesday, and more than 75% of the bonds were snapped up on the first day.
The Asian Development Bank issued 35 billion yen ($144 million) worth of 6.5% bonds that mature in October, 1995.
The bank, headquartered in Manila, is an international financial institution owned by 45 member countries. The United States and Japan, which each own 16.6% of the bank, are the two largest shareholders.
“The deal is in very good shape, in excess of 75% sold,” said Curtis Welling, vice president-capital markets and head of new issues at First Boston Corp., one of the co-managers of the group underwriting the issue. “The odds are it (the issue) will be free to trade tomorrow or Thursday.”
“The opening of the U.S. market to the issuing of yen-denominated securities is the last leg in the true internationalization of the currency,” Welling added.
Until now, trading of yen-denominated securities has occurred only in Tokyo and on the so-called Euroyen market in London. Traditionally, the Japanese government maintained strict exchange and financial controls on the yen, and yen-denominated bonds have been an unimportant factor in international borrowing.
However, in May, 1984, the United States and Japan reached an agreement on a complex package of financial measures that included a step-by-step program for Japan to increase international use of the yen.
Greater use of the yen in the world’s financial markets should raise its value in relation to other leading currencies. That, in turn, would make Japanese goods more expensive overseas.
The United States, facing an even larger trade deficit with Japan than last year’s $36.9 billion, hopes that will mean a drop in Japanese imports and perhaps a rise in the sale of U.S. goods to Japan.
But Welling said it would be speculative to conclude that the new bond issue will have any impact on the trade policy.
Graham Breadwell, vice president-treasury at Security Pacific National Bank, said the new bond issue is a reflection of the New York investment banking community’s perception that yen bonds can be sold in the United States, rather than any change in guidelines by the Japanese government.
Other co-managers of the underwriting group include Daiwa Securities America, Merrill Lynch Capital Markets, Salomon Bros. and Shearson Lehman Bros.