Retail Investors Are on a “Corporate Bond Buying Spree” – Rakuten Bonds Sell Out Instantly; Urgent Need to Expand Bond Fund Offerings - Nikkei

Article quotes (translated): “The market for retail-targeted corporate bonds is booming. With the return of an “interest-bearing world,” individual investors are shifting their funds from deposits in search of yield. “To accelerate the shift from savings to investment, it is essential to rebuild the lineup of bond-type investment trusts—products that vanished during the era of ultra-low interest rates.” “The level of demand has exceeded expectations,” said Hideki Shirane, Head of Fixed Income at Rakuten Securities,” “The issuance of corporate bonds aimed at retail investors is surging. Between April and July, issuance reached ¥1.38 trillion, already surpassing the ¥1.09 trillion issued in all of 2024 and setting a new record for that time frame. As domestic interest rates rise, funds are clearly flowing out of bank deposits and into corporate bonds, which offer steady returns with relatively low risk. Retail bonds now account for 18% of total corporate bond issuance—reaching a level not seen in nine years.” “Conditions for retail bonds have improved to the point where they are no longer considered inferior to institutional offerings. For instance, Rakuten Group’s 3-year bonds issued in July and August offered an identical coupon of 2.336% for both retail and institutional investors. When SoftBank Group (SBG) issued ¥600 billion in ordinary bonds for individuals this May—its largest retail issue ever—the coupon was 3.34%, slightly higher than the 3.336% offered on the ¥20 billion institutional tranche issued in parallel.” “One senior official at a domestic securities firm noted: ‘To bring even more individual money into the corporate bond market, we need to significantly expand our bond fund offerings.’” ““The long era of low interest rates essentially killed the bond fund market,” said Haruyasu Kato, a fund manager specializing in Japanese bonds at Asset Management One. Under low rates, domestic bonds lost appeal, and the industry stopped developing products and marketing strategies. “We are now at the inflection point of a revival,” Kato added.”