Japan Rate Moves Positive For Japan Bank EUR Credit

Japanese rate moves: positive for bank credit and MUFG, Mizuho and SMFG all issue EUR IG credit but move perhaps tempered by supply view.

• Japan moved rates up (and changed yield curve control) overnight in a move widely expected and reported some months ago by our colleague, Hiroshi Inoue.
• The experience in Europe, the UK and the US has been that moving rates from ultra-loose is a positive for bank margins, credit spreads and equity values. For a bank, deflation is the worst of all worlds, after all.
• We would be unsurprised to see similar reactions in the credits of the Japanese banks and note the above three all issue into the EUR IG index.
• Our caveat is that these banks generally have deposit surpluses and the relative cost of EUR credit is now lower which could presage increased supply. We still believe the over-riding factor will be the better margin and revenue outlook of the parents, though.