MUFG Tightens Pricing on <b>200 Billion Yen</b> AT1 Bonds Amid Wider Senior Spreads

Mitsubishi UFJ Financial Group (MUFG) recently sold 200 billion yen of perpetual additional Tier 1 (AT1) bonds at slightly lower yields than its previous deal in April. This move indicates solid demand for these higher-yielding, loss-absorbing bank bonds.

The AT1 bonds were split into two callable tranches: a five-year-four-month call priced 100 basis points over Japanese government bonds (JGBs) and a 10-year-four-month call at 105 basis points over. This pricing is notable, as senior bonds from highly rated Japanese issuers have seen their spreads widen, normally pushing up borrowing costs.

The fact that MUFG could tighten its AT1 deal by about 5 basis points while safer bank debt is getting cheaper suggests that investors are treating AT1s more like an income product than a pure 'credit barometer'. This decoupling means that AT1 pricing can hold up even when senior funding conditions wobble, potentially lowering MUFG's cost of issuing regulatory capital.