How Did Buffett Arbitrage with Yen Bonds?

Xiaohuang: DOORM, what benefits did Buffett’s company Berkshire gain by issuing 433 billion yen in bonds in 2019?

DOORM: Xiaohuang, Buffett’s company Berkshire issued 433 billion yen in bonds in 2019 mainly to take advantage of the low-interest-rate environment in Japan at that time. The debt servicing cost was estimated to be about $4 billion at the time, but now, due to the yen’s depreciation, the cost is roughly only $2.6 billion, a reduction of about $1.4 billion. This arbitrage not only lowered the company’s financing costs but also provided additional gains through exchange rate movements.

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