Wells Fargo says Asia bond bulls chasing US debt as Japan buys

June 9: Wells Fargo said its clients in Asia are chasing US bonds as Japan reported investors in the nation bought the most overseas debt in three weeks.

“Investors in Asia remain strong buyers of US fixed income,” Wells Fargo strategists Boris Rjavinski and Michael Schumacher wrote in a reportWednesday,followingavisitto clientsintheregion.“Treasurybulls rule the day. We came away quite impressed by the volume of cash chasingUSfixedincomeassets.”

Japanese investors boosted holdings of overseas debt by 893.9 billion yen ($8.38 billion) last week, the most since the period ended May 13, the ministry of finance said Thursday in its weekly report on investment trends. Money managers in the nation are more active in treasuries than in any other bond market outside their own country, MOF data show.

Treasuries gained the most in eight months last week as a labor department report showed US employers added fewer jobs in May than economists surveyed by Bloomberg projected. A 10-year note auction Wednesday drew record demand from a group of investors that includes overseas central banks. The Treasury Department is scheduled to auction 30-year bonds Thursday.

The 10-year note advanced for a third day Thursday, with the yield dropping three basis points to 1.68 percent as of 6.43 am in London, according to Bloomberg Bond Trader data.Thepriceof the1.625%security due in May 2026 rose 1/4, or $2.50 per$1,000faceamount,to9917/32. The Bloomberg US Treasury Bond Index returned 0.8% last week, the biggest gain since the period ended October 2.

WellsFargo’sRjavinskiandSchumacher said they met with several central bank reserve managers and commercial banking institutions during their Asia tour. “Not a single client we spoke to was outright bearishTreasuries,”theywrote.Thebrokerage arm of San Francisco-based Wells Fargo became the 23rd primary dealer in April, joining the firms that underwrite the US debt and trade directly with the Fed.

Most ever

Indirect bidders, the investors class that includes foreign central banks, bought 73.6% of the notes at Wednesday’s 10-year sale, the most ever based on treasury department data that go back to 2003.

Fukoku Mutual Life Insurance is staying away from Treasuries and other bond markets because yields are too low, said Yoshiyuki Suzuki, head of fixed income for the company in Tokyo. Suzuki, who helps oversee $61.2 billion, said he would like to buy US debt if the 10-year yield climbs above 2%.

Mitsubishi UFJ Kokusai Asset Management, with $112.6 billion, favorsTreasuriesovernegative-yielding Japanese 10-year bonds, according to Tatsuya Higuchi, chief fund manager in the fixed income investment division in Tokyo. “We have a longpositioninUSdollarsandother currencies which have relatively higher yields.” Bloomberg