UPDATE 1-ANZ Samurai bond sale biggest ever by Australian firm

By Rika Otsuka

TOKYO, March 5 (Reuters) - Australia & New Zealand Banking Group Ltd (ANZ.AX: Quote, Profile, Research, Stock Buzz) sold 135.8 billion yen ($1.3 billion) of Samurai bonds on Wednesday, the largest ever from an Australian issuer.

Samurai bond issuance has hit a record high in the business year ending in March as Japanese investors are hungry for the higher yields the paper offers and have been willing to fund foreign financial firms that have trouble securing funds elsewhere due to the global credit crunch.

About 2.6 trillion yen in Samurais -- yen bonds issued by overseas entities in Japan -- have been sold in the current business year.

Samurais have flourished since the credit crunch hit last August because Japan has not been hit so hard by the market troubles sparked by defaults on U.S. subprime mortgages, although Japanese fund managers have turned more selective about which names they will buy.

They have avoided financial firms saddled by huge debt write-downs but have been eager to buy paper from institutions that have fared better, such as Australia's ANZ and National Australia Bank (NAB) (NAB.AX: Quote, Profile, Research, Stock Buzz) or investment banks like Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz).

NAB issued 90 billion yen of Samurais last month, while Goldman sold 148.5 billion of Samurais in January.

The Samurai market has been a place where overseas firms can rely on raising big funds as Japanese investors favour the paper, which offers higher returns than domestic corporate and government bonds.

Yields on benchmark JGBs <JP10YTN=JBTC> have fallen back down near a 2-1/2-year low around 1.3 percent after peaking near 2 percent in the previous two years. The Nikkei share average .N225 is sliding towards a two-year low struck near 12,500 in January.