Troubled regional banks are plunging into riskier corners of the credit markets, in a battle to survive ultralow interest rates and an industry shakeout.
As debt yields tumble globally, the lenders are also facing weak business at home, where a shrinking population is hitting outlying areas hardest, and that's prompting authorities to push for consolidation. Desperate to avoid that fate, the banks are shedding their traditional conservatism, fueling questions about their ability to manage riskier holdings including foreign assets.
The latest case came last week. Local lenders were among the buyers of samurai bonds — those denominated in yen and issued by non-Japanese companies — sold by Export-Import Bank of India with a BBB+ rating, just three steps away from junk, that may have dissuaded the financial firms in the past. In another unconventional move last month, a few regional banks also put their money in the first negative-yielding note issued by a Japanese agency.
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