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Japan’s Biggest Bank Won a $500 Million Bond Deal, Only to Lose $15 Million
The securities unit of Mitsubishi UFJ Financial Group (MUFG), one of Japan’s largest banks, purchased $500 million in bonds only to fumble up in the red.
A move against its competitor Credit Suisse Group AG, the company fought hard to garner what they thought would yield solid profits in 2027, only to receive a mediocre response from investors and $15 million in losses on the table.
The Bond Market Is Suffering
The bonds came from gas and oil exploration venture CNX Resources Corp. Believing customers would be excited about these newfound investment opportunities, MUFG sought to overpower the purchase proposal of Credit Suisse, which was later rejected by CNX. The company ultimately won the bet, but its aggressive strategy has failed to produce serious interest amongst its clients.
At the time of writing, MUFG has been forced to sell many of the bonds at a discount and has lost approximately $15 million following the purchase. These losses are also expected to increase in the coming weeks.
This marks MUFG’s first time leading U.S. junk bonds. Designed to mature in eight years and yield prices of roughly 7.25 percent, MUFG was planning to sell the bonds to investors at higher prices of approximately 7.75 percent. The bond market, however, has been trapped in an extremely volatile state since early 2018, and with investors fearful of risk, MUFG underestimated the potential lack of interest its customers would exhibit.
