Japan's leading debt dealers: Greenwich

Jan 16, 2014

Abenomics may have given Japanese equities a shot in the arm, but it has forced government bond volumes down. Still, the top dealing dogs retain a familiar look.

Amid a drop in institutional trading of Japanese government bonds, Mizuho Securities and Mitsubishi UFJ Morgan Stanley Securities maintained their momentum as the leading dealers, according to Greenwich Associates.

Bond purchases implemented as part of Abenomics – Japanese prime minister Shinzo Abe’s three-pronged approach to reinvigorate the economy – drained liquidity from the JGB market, says a report from the US research firm. From June 2012 through June 2013, trading volumes in JGBs fell 15% to ¥328 trillion ($3.5 trillion) from ¥392 trillion, based on interviews with 318 fixed income investors in Japan.

Against this backdrop, Mizuho remained the top dealer with a 15.1% market share in JGB trading, followed by Mitsubishi UFJ (13.3%), Nomura Securities (11.4%), SMBC Nikko Securities (8.3%), Daiwa Securities (6.8%) and Goldman Sachs (6.3%).

In secondary investment-grade yen credit bonds, Mitsubishi UFJ and Daiwa Securities held the biggest market shares, with 18.5% and 18.2% respectively, followed by SMBC Nikko (16.1%), Mizuho (14.9%) and Nomura (13.8%).

“With volumes down so precipitously, foreign dealers are finding it difficult to support robust JGB businesses, so they are focusing on other products, including credit bonds,” says Greenwich consultant Tim Sangston.

“As a result, even though domestic dealers now control some 80% of trading volumes in investment-grade yen credit bonds, a number of foreign dealers, including Citi, Bank of America Merrill Lynch and Barclays, are focusing on this product and showing some momentum.”

Foreign firms, meanwhile, dominate non-yen bond trading. Among Japanese securities firms, only Nomura ranks in the top five. Deutsche Bank holds the biggest market share with 13.5%, followed by Citi (9.4%), Barclays (8.7%), Nomura (8.0%) and JP Morgan (7.9%).

For Japanese interest rate swaps trading, BNP Paribas came top with 14.1% market share, followed by Deutsche Bank (12.8%), Barclays (9.5%) and Nomura (8.6%).

For interest rate structured notes, Nomura led the pack, with a market share of 17.4%, followed by Mizuho (12.1%), Daiwa (10.7%), Mitsubishi UFJ (8.9%) and Barclays (8.8%).

Between May and July last year Greenwich conducted 318 interviews with banks, investment firms and insurers in Japan investing in domestic fixed income, and 155 interviews with investment professionals in Japan investing in international fixed income.

Each year, Greenwich asks institutions to name the dealers they use and to rate them in a series of service quality categories. In yen-denominated fixed income, Mitsubishi UFJ, Mizuho and Nomura came top last year for Japanese fixed-income sales.

Nomura came in first for Japanese fixed income research, and the leaders for yen-denominated fixed income trading were Mitsubishi UFJ and Mizuho.

Citi was the non-yen leader for both fixed income sales and trading, while Barclays topped fixed income research.

Last year, Greenwich expanded the scope of its Japanese fixed income research to include credit-linked notes/loans and repackaged notes. Mitsubishi UFJ commanded the biggest market share (20%), followed by Nomura and Bank of America Merrill Lynch.

In repackaged notes, Nomura and Bank of America Merrill Lynch led by a wide margin with 23% and 20.8%, respectively.