Sumitomo Forestry Co., Ltd.

With the yield on new 10-year government bonds, a benchmark for long-term interest rates, hovering near 3%, corporate funding costs are rising, but demand for funds for capital investment and M&A remains strong. Companies are struggling to control costs by shortening the maturity of corporate bonds, while also rushing to develop overseas and individual investors. Against the backdrop of rising government bond yields, there is a clear trend of corporate bonds with higher spreads attracting demand, and Sumitomo Forestry's public hybrid bond of approximately 250 billion yen drew orders of over 700 billion yen, nearly three times the issue amount. According to the Ministry of Finance's Financial Statements Statistics of Corporations, capital investment in the April-June 2026 quarter increased 1.6% year-on-year to over 13 trillion yen across all industries, and the Bank of Japan's June Tankan survey showed that large enterprises' fiscal 2026 capital investment plans rose 11.5% year-on-year. Meanwhile, regional banks, shinkin banks, and credit cooperatives, which were major buyers, have shifted to issuing their own bonds, and pension funds and asset management companies are increasing their presence. Companies that cannot secure the necessary funds from domestic institutional investors alone are expanding their funding sources to overseas and individual investors, with SoftBank Group issuing individual bonds worth 1 trillion yen domestically. According to Daiwa Securities' estimates, Japanese companies' dollar bond issuance approached 100 billion dollars in 2025, and has already reached about 50 billion dollars in 2026.

Homebuilder stocks lagged the broader market in the first half of 2026, with the S&P Composite 1500 Homebuilding Index gaining about 6% through June 30, trailing the 9% advance in the S&P 500, according to a BofA Securities midyear report. Average 2026 earnings-per-share estimates for the analyst's coverage universe fell about 18% since the start of the year, closely tracking stock performance. Affordability pressures, elevated housing inventory, and higher construction costs continued to weigh on the U.S. housing market, with the median age of first-time homebuyers reaching a record 40 years in 2025. President Donald Trump abruptly canceled the signing ceremony for the bipartisan 21st Century ROAD to Housing Act, the most sweeping housing affordability bill in decades, after it cleared Congress. The analyst also noted increased consolidation, with Sumitomo Forestry agreeing to acquire Tri Pointe Homes and Berkshire Hathaway announcing plans to acquire Taylor Morrison Home Corporation.