What are samurai bonds? Egypt intends to raise $500 million in yen bonds, also known as samurai bonds, as the Egyptian Ministry of Finance launched the first issuance of “samurai” bonds in the Japanese market, worth 60 billion yen (half a billion dollars), to become the first country to issue Japanese yen bonds, issued by Foreign borrowers in Tokyo.

The bonds will have a competitive return due to the harsh market conditions that had limited access to many emerging economies, as the ministry said in its statement that it had obtained (low pricing for samurai bonds in the Japanese market, where the coupon amounted to 0.85% annually for 5 years, which makes it more distinctive compared to The coupon prices of international dollar bond issues at an average annual cost of issuance (2.33%).

This Egyptian trend comes days after the Central Bank’s sudden decision to raise interest rates by about 1%, and the depreciation of the pound against the dollar to more than 18 pounds to the dollar until Wednesday, and the Ministry of Finance launched this issue with a credit guarantee from the Japanese Bank (Sumitomo Mitsui). This move is one among many next as Egypt scrambles to secure the state of its economy given that it has to import most of its fuel and buy about 85 percent of its wheat from Russia.

This issuance is characterized by specifications of a special nature due to the difference of the Japanese market from other international markets, as the Japanese investor is more selective in its investment policies and more willing to invest in debt instruments of countries with high credit rating, and the government announced for the first time that it is considering selling bonds denominated in Japanese yen. In 2019. The Ministry of Finance was also seeking to issue Chinese yuan-denominated panda bonds around the same time.

Experts and analysts believe that Egypt's tendency to issue (samurai bonds) comes as a desire to attract additional liquidity to the stock market, expand the currency basket and reduce risks related to public debt. From inflationary pressures, commodity prices have risen since Russia invaded Ukraine last month.

Samurai bonds offer better returns than other fixed income investments in Japan, which makes them attractive to investors. Issuers also benefit from lower coupon rates than other bonds. Regulations and guidelines for issuing this type of bond are set by the Financial Services Agency, which is the financial watchdog. Japanese.

Issuers can convert the proceeds from the issue into another currency at the same time to take advantage of lower costs.
advantages of samurai bonds: Conservative Japanese institutional investors interest in investing in large foreign companies, ability to hedge currency risk.

As for the defects of these bonds: These bonds are subject to double taxation for US issuers.
Complicated placement procedures and inflexibility in terms of placement, many countries have been harmed in this crisis, but Egypt is hurting more because it imports most of its fuel and buys about 85% of its wheat from Russia and Ukraine. It also depends heavily on tourists from Russia.