Japanese Farmers’ Bank to buy $2.9bn of Cerberus deal

Tokyo / Bloomberg

Japan’s Norinchukin Bank bought more than $2.9 billion of UK mortgage-backed bonds sold by Cerberus Capital Management, according to people familiar with the matter.
The cooperative lender, which serves as the central financial institution for Japanese farmers and fisherman, acquired senior-ranking notes in a 6.1 billion pound deal that priced earlier this month, said the people, who asked not to be identified because they’re not authorized to talk about it. Cerberus sold the bonds secured by mortgages from failed U.K. lender Northern Rock Plc, which it acquired last year.
Japanese investors are replacing their bond holdings in favor of riskier assets abroad as negative yields erode the appeal of domestic government bonds. Eight of 11 Japanese regional banks surveyed by Bloomberg last month said they’ve begun or are considering asset reallocation, with foreign bonds and real estate investments among the most popular products.
Masahiro Mikami, a Tokyo-based spokesman for Norinchukin Bank, declined to comment on whether the bank had bought the bonds. Officials for Cerberus and Morgan Stanley, which arranged the transaction known as Towd Point Mortgage Funding 2016-GR1, also declined to comment on the allocation of the deal.
The transaction was the largest sale of asset-backed debt in Europe in more than nine years, people familiar with the matter said on April 5.
Yields on Japanese government bonds with maturities as long as 10 years turned negative this year after the Bank of Japan announced in January that it would start charging lenders on some of their excess reserves held with the central bank.
The central bank board is scheduled to meet April 27-28 to consider any changes to monetary policy. Economists are split on whether it made the right decision in adopting the negative rate, with just over half of those surveyed by Bloomberg
saying it was a mistake.