Yield surge spurs big­gest Ja­pan buy­ing of US bonds since 2016

The Star Malaysia - StarBiz - - Foreign News -

TOKYO: Ja­panese in­vestors bought the most US sov­er­eign bonds since July 2016 in Septem­ber, when the Fed­eral Re­serve raised in­ter­est rates for the third time this year, spurring an ad­vance in the dol­lar and Trea­sury yields.

In­vestors bought a net 2.28 tril­lion yen (US$20bil) of the debt, ac­cord­ing to bal­ance-of-pay­ments data from the Asian na­tion’s Fi­nance Min­istry yes­ter­day.

“Ja­panese in­vestors may be in­creas­ing pur­chases of un­hedged US sov­er­eign bonds as the per­cep­tion to­ward dol­lar-yen im­proved af­ter the Fed’s tight­en­ing,” said Ei­ichiro Miura, gen­eral man­ager of the fixed-in­come in­vest­ment depart­ment at Nis­say As­set Man­age­ment Corp in Tokyo

Ja­panese in­vestors were net buy­ers of Ger­man sov­er­eign debt in Septem­ber for the first time since March, MoF data show.

Net pur­chases of French bonds were the big­gest since Fe­bru­ary. Ja­panese funds net sold Ital­ian notes for a sec­ond straight mon­thJa­panese in­vestors were net buy­ers of all Span­ish debt, in­clud­ing sov­er­eigns, for a 15th con­sec­u­tive month.

Sep­a­rately, pre­lim­i­nary fig­ures for Oc­to­ber showed Ja­panese life in­sur­ers sold a net 328 bil­lion yen of for­eign bonds, the most since March 2015.

The ta­ble be­low shows net buy­ing/sell­ing of over­seas sov­er­eign bonds in bil­lions of yen Hedged US bonds haven’t been at­trac­tive due to ris­ing dol­lar-hedg­ing costs, so in­vestors may have al­lo­cated their funds into un­hedged bonds be­fore the fis­cal half ended in Septem­ber, Miura says.

At the same time, it’s also pos­si­ble that they may have bought some US debt even by hedg­ing their cur­rency ex­po­sure af­ter the 10-year yield rose above 3%, he says, adding that pur­chases may have con­tin­ued in Oc­to­ber.

US 10-year Trea­sury yield reached a four­month high of 3.11% in Septem­ber and climbed 20 ba­sis points dur­ing the month, the most since April. The dol­lar-yen cur­rency pair ap­pre­ci­ated 2.4% in Septem­ber, the most in five months.

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