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What is Japanese mortgage bond?

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What is Japanese mortgage bond?

Postby brewer43 » Thu Dec 13, 2012 9:36 pm

I looking to use real estate property as collateral to borrow money like a home equity loan to complete business transactions here in Japan.
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What is Japanese mortgage bond?

Postby bayhard16 » Thu Dec 13, 2012 9:36 pm

I looking to use real estate property as collateral to borrow money like a home equity loan to complete business transactions here in Japan.
I looking to use real estate property as collateral to borrow money like a home equity loan to complete business transactions here in Japan.
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Joined: Tue Jun 26, 2012 12:42 am

What is Japanese mortgage bond?

Postby sigwalt » Thu Dec 13, 2012 9:39 pm

June 8 (Bloomberg) -- Mizuho Securities Co.'s Hajime Takata, Japan's top bond analyst, recommends buying Japanese mortgage- backed bonds and real estate investment trusts because a 14-year slump in land prices in the nation's six biggest cities has ended.

Japan's government bond yields are the lowest in the world, so fund managers should boost returns by adding trusts backed by assets such as commercial buildings and bonds secured by home mortgage loans, Takata said in an interview in Tokyo.

``A diet of Japanese government bonds is not so profitable and so it needs some additional returns, like meat and vegetables,'' said Takata, who's been named the best analyst for four straight years by Nikkei Bonds and Financial Weekly, a magazine that covers the nation's debt markets and produces rankings on economists and bond analysts.

``Investors should gradually diversify into other areas'' to increase profitability, said Takata, who added that he expects yields on 10-year government bonds to remain less than 2 percent until at least the end of 2006.

Mortgage-backed bonds sold by the Government Housing Loan Corp., a government agency that has provided mortgages for about a third of residential properties in the past sixty years, yield about 43 basis points, or 0.43 percentage point, more than Japan's sovereign debt, according to Nomura Securities Co.

Rising Land Prices

The dividend yield on the Tokyo Stock Exchange REIT Index, which is comprised of 15 trusts, is about 3.5 percent. By comparison, the yield on benchmark 10-year bonds fell to a more than one-year low of 1.195 percent on June 2, and has held below 2 percent for almost five years. The yield was 1.22 percent yesterday.

When the 10-year bond yielded 1.42 percent on Feb. 16, Takata predicted it would decline to 1.2 percent during the first half of this year.

Commercial land prices in Tokyo, Yokohama, Nagoya, Kyoto, Osaka and Kobe rose during the six months ended March, the first increase since September 1990, according to figures from the Japan Real Estate Institute. They fell 87 percent in the 14 years to the end of September.

Japan's government bonds returned 1.62 percent during the first five months of this year, the worst performance of the 20 largest government debt indexes compiled by Merrill Lynch & Co.

`Positive Factor'

``Yields on Japanese government bonds are very, very low, and that is a very positive factor for the mortgage-backed bond market,'' said Koji Shimamoto, chief strategist in Tokyo at BNP Paribas Securities Japan Ltd., the No. 2 bond analyst, according to the Nikkei Bonds and Financial Weekly survey.

Takata got a degree in economics in 1982 from Tokyo University, the same college as Finance Minister Sadakazu Tanigaki.

Mortgage-backed bonds and property trusts are stable because they are backed by high-quality real estate, said Takata, 46, who started his career at the Industrial Bank of Japan, Ltd. in 1982.

Takata on Feb. 16 said Japan's economic environment was good for bonds and that the expansion was posed to slow. The yield on 10-year Japanese bonds dropped to 1.24 percent on June 6 from last year's high of 1.94 percent set on June 17. A government report Feb. 16 showed Japan's economy fell into recession last year.

Nomura Securities' index of residential mortgage-backed debt, which contains 1.3 trillion yen ($12 billion) of securities, gained 5.3 percent in 2004. By comparison, Japan's government bonds returned 1.3 percent last year, including interest, Merrill Lynch data show.

`Strong Background'

``Takata has a lot of experience and a strong background, not only in the bond market but also with loans,'' said Shimamoto, who worked with Takata at the Industrial Bank of Japan.

Takata, who also got a masters degree from Oxford University in 1986, recommends property trusts, or REITs, which are companies that develop and own property such as Tokyo skyscrapers and shopping malls. The market value of such Tokyo-listed REITs has risen eightfold to 2.1 trillion yen, from 260 billion yen when they first traded in 2001, according to Bloomberg data.

``The cream of real estate products in Japan go into real estate investment trusts,'' said Takata, who runs a team of 25 people. ``Real estate prices have definitely bottomed in cities like Tokyo.''

BNP Paribas' Shimamoto agrees. ``REITs are a good investment,'' he said.

Small Market

The small amount of mortgage-backed bonds makes them unattractive because the gap between where investors can buy and sell them is too wide, said Norihisa Takao at Daiwa Asset Management Co. in Tokyo.

Outstanding mortgage bonds in Japan are less than 1 percent of the 686 trillion yen of sovereign debt the government had as of the end of December. Japan's government is the world's largest debtor.

``When the size of the market gets bigger, say around 5 percent of outstanding bonds, then I may invest,'' said Takao, who helps oversee the equivalent of $46 billion of fixed-income securities at Daiwa Asset, the largest manager of Japanese money market funds. ``It's difficult to get a decent price on mortgage- backed bonds.''

Japan's Housing Loan Corp. has been selling mortgage bonds since 2002, when the government decided to make it similar to Fannie Mae, the largest U.S. mortgage finance company. Like bonds sold by Fannie Mae, the debt isn't guaranteed by the government.

Standard & Poor's rates the Housing Loan Corp.'s mortgage- backed bonds a top AAA, higher than its AA- rating for Japan's local-currency debt.

The extra yield makes bonds backed by property loans attractive, said Atsushi Koyano, who helps manage yen bonds including mortgage-backed securities in Tokyo for Sompo Japan Insurance, the nation's No 3. casualty insurer with $47 billion under investment.



To contact the reporter on this story:
Chris Cooper in Tokyo at [email protected]
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What is Japanese mortgage bond?

Postby wyatt54 » Thu Dec 13, 2012 9:51 pm

Commercial Mortgage-backed Securities in Japan
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