2013 Share and Quality Leaders In Japanese Fixed Income

Amid a dramatic slowdown in institutional trading volume of Japanese government bonds (JGBs), Mizuho Securities and Mitsubishi UFJ Morgan Stanley Securities maintained their momentum as the market’s leading dealers, according to the results of Greenwich Associates 2013 Japanese Fixed-Income Investors Study.

Bond purchases implemented as part of the Abe government’s economic stimulus package have drained liquidity from the JGB market. Over the course of the research period covered in the Greenwich Associates study—from June 2012 to June 2013—trading volumes in JGBs declined approximately 15%.

In this difficult environment, Mizuho defended its position as the market’s top  leader, with a 15.1% market share in JGB trading, followed by Mitsubishi UFJ Securities at 13.3%, Nomura Securities at 11.4% and SBMC Nikko Securities at 8.3%. Daiwa Securities and Goldman Sachs are tied with market shares of 6.8% and 6.3% respectively. These firms are the 2013 Greenwich Share Leaders in Japanese Government Bonds.

Gains by Mitsubishi UFJ Morgan Stanley Securities have propelled that firm into a tie with Daiwa Securities at the top of the market in secondary trading of yen-denominated investment-grade credit bonds, with both firms claiming market shares of 18.2–18.5. SMBC Nikko Securities and Mizuho Securities are next, tied with market shares of approximately 15–16%, followed by Nomura Securities at 13.8%. These firms are the 2013 Greenwich Share Leaders in Secondary Trading of Investment-Grade Yen Credit Bonds.

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

Foreign firms already dominate trading in non-yen bonds. Among Japanese securities firms, only Nomura, with its relatively robust international presence, ranks among the market leaders. Deutsche Bank holds a commanding position with a market share of 13.5%, followed by Citi and Barclays, which are tied with market shares of 8.7–9.4%, and Nomura and J.P. Morgan, which are tied at approximately 8.0%. These firms are the 2013 Greenwich Share Leaders in Non-Yen Bond Bonds.

Greenwich Quality Leaders
Every year, Greenwich Associates asks institutions participating in our Japanese fixed-income research to name the dealers they use and to rate them in a series of service quality categories. Firms that receive scores that top those of competitors by a statistically significant margin are named Greenwich Quality Leaders.  In yen-denominated fixed income, Mitsubishi UFJ Morgan Stanley Securities, Mizuho Securities and Nomura Securities are the 2013 Greenwich Quality Leaders in Japanese Yen-Denominated Fixed-Income Sales. Nomura is the 2013 Greenwich Quality Leader in Japanese Yen-Denominated Fixed-Income Research, and the 2013 Greenwich Quality Leaders in Japanese Yen-Denominated Fixed-Income Trading are Mitsubishi UFJ Morgan Stanley Securities and Mizuho.

In non-yen (International) fixed income, Citi is the 2013 Greenwich Quality Leader in both Fixed-Income Sales and Trading, and Barclays is the 2013 Greenwich Quality Leader in Fixed-Income Research.

Interest Rate Derivatives
BNP Paribas and Deutsche Bank are tied at the top of the market in Japanese interest rate swaps trading with market shares of approximately 13–14%, followed by Barclays and Nomura, which are tied at 8.6–9.5%, and Mitsubishi UFJ Morgan Stanley Securities and UBS, which are tied at 6.2–6.7%. Nomura is the clear leader in structured notes with a market share of 17.4%. Next Mizuho and Daiwa are tied with market shares at 10.7–12.1%, followed by Mitsubishi UFJ Morgan Stanley Securities and Barclays, tied at about 9.0%. These firms are the 2013 Greenwich Share Leaders in these products.

Structured Credit
In 2013, Greenwich Associates expanded the scope of its Japanese fixed-income research to include two new structured credit products: credit-linked notes/loans (CLNs/CLLs) and repackaged notes. Mitsubishi UFJ Morgan Stanley Securities dominates the market for CLNs/CLLS, with an impressive market share of 20%, followed by Nomura Securities and Mizuho Securities, which are tied at approximately 14–15%. In repackaged notes, Nomura Securities and Bank of America Merrill Lynch lead the market by a wide margin with market shares of 23.0% and 20.8%, respectively.