19 Jun 2015
Japan: Large foreign bond selling amid higher volatility – Nomura
FXStreet (Barcelona) - Yujiro Goto, Research Analyst at Nomura, notes that the MOF data suggests Japanese investors continued selling foreign bonds for the third consecutive week, and marking the biggest net selling in 10 weeks.
Key Quotes
“Japanese investors sold foreign bonds aggressively last week, according to the MOF. They sold JPY1851bn ($14.9bn) of foreign bonds, the biggest net selling in 10 weeks. This marks the third consecutive week of net selling. During the previous three weeks (3-23 May), Japanese investors bought JPY2504bn ($20.2bn) of foreign bonds, but total net selling over the last three weeks (24 May – 13 June) has reached JPY2584bn ($20.8bn).”
“A large part of foreign bond selling over the last three weeks is still likely to have been by banks, as about 75% of foreign bond buying in May was by banks, and we judge that the FX impact of the large foreign bond selling last week was smaller than the face amount suggests. At the same time, a further rise in global yields last week may have encouraged lifers to reduce their positions in foreign bonds, mostly hedged bonds. 10yr JGB yields recovered to the 0.50% level last week, which may also have slowed the portfolio shift from JGBs into foreign bonds.”
“Retail investors have also been selling foreign bonds via toshins recently, albeit at a slower pace.”
Key Quotes
“Japanese investors sold foreign bonds aggressively last week, according to the MOF. They sold JPY1851bn ($14.9bn) of foreign bonds, the biggest net selling in 10 weeks. This marks the third consecutive week of net selling. During the previous three weeks (3-23 May), Japanese investors bought JPY2504bn ($20.2bn) of foreign bonds, but total net selling over the last three weeks (24 May – 13 June) has reached JPY2584bn ($20.8bn).”
“A large part of foreign bond selling over the last three weeks is still likely to have been by banks, as about 75% of foreign bond buying in May was by banks, and we judge that the FX impact of the large foreign bond selling last week was smaller than the face amount suggests. At the same time, a further rise in global yields last week may have encouraged lifers to reduce their positions in foreign bonds, mostly hedged bonds. 10yr JGB yields recovered to the 0.50% level last week, which may also have slowed the portfolio shift from JGBs into foreign bonds.”
“Retail investors have also been selling foreign bonds via toshins recently, albeit at a slower pace.”