(Bloomberg) -- Japan’s Norinchukin Bank kicked off its first dollar bond sale since the agricultural lender said it expects massive losses on its investments in overseas bonds.

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The bank started marketing a five-year green bond on Tuesday at a spread of around 155 basis points over Treasuries, according to a person familiar with the matter who asked not to be identified. The spread is wider than the 130 basis-point area guidance the bank gave when it last sold such a bond in March 2023, despite significant tightening in market spreads over the last 18 months; that deal ended up pricing at a spread of 110 basis points.

Proceeds will be primarily used to finance or refinance environmentally-related projects as defined in the bank’s sustainable-bond framework. The debt sale may price Tuesday, New York time.

A representative for JPMorgan Chase & Co., the lead bookrunner and the issuer’s green structuring agent, did not immediately respond to a request for comment.

Japan’s largest agricultural bank, commonly known as Nochu, posted a ¥413 billion loss ($2.8 billion) in the three months ended June 30, after taking a big hit on its investments in US and European government bonds. The lender also said it expects to report a loss of about ¥1.5 trillion in the current fiscal year.

The spreads on Norinchukin’s dollar debt have ballooned since it first highlighted the bond losses in May, but a recent equity capital raise by the bank and a decline in dollar yield premiums globally on the back of strong US economic data have given a tailwind to the offering.

The initial price guidance for the bond at around 155 basis points is about 32 basis points outside the bank’s dollar debt curve, according to data compiled by Bloomberg, using the Bloomberg NIA function.

The new bond is likely to price well wide of similar maturity-notes from Japan’s megabanks, and Norinchukin will probably have to pay a new issue premium due to the overhang from its securities-portfolio restructuring and related losses, Bloomberg Intelligence credit analysts Pri De Silva and Adrian Sim wrote in a note Monday. They said fair value for a five-year bond from Norinchukin is around 115 basis points.

--With assistance from Ameya Karve and Emma Sanchez.

(Update with details on the use of proceeds in third paragraph and adds comment line in the fourth paragraph.)

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