By Junko Fujita

TOKYO (Reuters) – Sumitomo Mitsui Monetary Group (NYSE:) priced $1.04 billion of extra tier-1 (AT1) debt on Wednesday, turning into the primary main Japanese financial institution to promote them for the reason that worth of comparable bonds issued by Credit score Suisse was worn out.

SMFG priced the bonds in two tranches, in 89 billion yen ($662.50 million) five-year notes, and 51 billion yen 10-year bonds, whose phrases market gamers mentioned have been enticing.

“In Japan, the place spreads over company bonds are skinny, the phrases for these AT1 bonds have been moderately good, offered that the banking sector is credible,” mentioned Nana Otsuki, senior fellow at Pictet Japan.

“SFMG had a selection of not promoting them however they went forward, probably signalling that the Japanese monetary system could also be extra secure than these in different international locations.”

Traders had grave doubts about AT1 bonds amid the market turmoil brought on by the government-led rescue of Credit score Suisse by rival UBS. Swiss regulator FINMA decided that Credit score Suisse’s AT1 bonds can be worn out, a call that rocked world credit score markets.

Home peer Mitsubishi UFJ (NYSE:) Monetary Group Inc mentioned earlier this month it might put AT1 debt issuance on maintain till mid-Could on the earliest, pointing to weak investor demand and market circumstances.

AT1 bonds – generally known as “contingent convertibles” or “CoCo” bonds – might be transformed into fairness or written off if a financial institution’s capital stage falls beneath a sure threshold.

Japanese banks’ AT1 bonds had been schemed in a approach the worth is secured even when the federal government is concerned in restructuring, and SMFG’s new points are seen to have the identical scheme, mentioned Pictet’s Otsuki.

The 89 billion yen issuance would carry a coupon price of 1.879% for the preliminary 5 years and two-month interval, a regulatory submitting confirmed. The 51 billion yen one would yield 2.180% for the primary 10 years and two months.

($1 = 134.3400 yen)