10 Dec 2013
Flash: Japanese investor flows to put further pressure on the Yen - RBS
FXstreet.com (Bali) - Japanese investor flows - from heavy sellers of foreign assets in H1 to moderate buyers in H2 - suggest they will be a factor that provides support to USD/JPY over the period ahead, notes Greg Gibbs, FX Strategist at RBS.
Key Quotes
"Some news reports have commented on a pick up in foreign bond buying by Japanese investors seeking higher perceived real yields abroad and shielding them against potential declines in the JPY."
"Marketwatch quotes a large manager of a Japanese asset management firm as saying, "Expectations that the yen will weaken are a big driver for buying bonds," (Marketwatch.com). They report the firm has increased allocation to USD bonds from 30.1% to 31.4% (equivalent to $4.2bn), EUR-bonds from 23.9% to 27.8% and GBP bonds from 2.8% to 7.1% since end-Sep. And suggested they have targeted short term bonds to avoid losses from rising yields."
"A Bloomberg article reports that Japan holdings of US government debt rose by $98.2bn in Q3, the second largest increase since the US Treasury began releasing data in 2000. (Bloomberg.com). The article also suggests that Japanese investors are attracted to the higher long term yields in the US, seeing little inflation risk in the US."
This may be an example where the relatively low Japan yields are helping hold down US yields. The Bloomberg article quotes a fixed income manager at a Japan Life Insurance company as saying, "The real yield is negative in Japan, so foreign bonds are attractive."
Key Quotes
"Some news reports have commented on a pick up in foreign bond buying by Japanese investors seeking higher perceived real yields abroad and shielding them against potential declines in the JPY."
"Marketwatch quotes a large manager of a Japanese asset management firm as saying, "Expectations that the yen will weaken are a big driver for buying bonds," (Marketwatch.com). They report the firm has increased allocation to USD bonds from 30.1% to 31.4% (equivalent to $4.2bn), EUR-bonds from 23.9% to 27.8% and GBP bonds from 2.8% to 7.1% since end-Sep. And suggested they have targeted short term bonds to avoid losses from rising yields."
"A Bloomberg article reports that Japan holdings of US government debt rose by $98.2bn in Q3, the second largest increase since the US Treasury began releasing data in 2000. (Bloomberg.com). The article also suggests that Japanese investors are attracted to the higher long term yields in the US, seeing little inflation risk in the US."
This may be an example where the relatively low Japan yields are helping hold down US yields. The Bloomberg article quotes a fixed income manager at a Japan Life Insurance company as saying, "The real yield is negative in Japan, so foreign bonds are attractive."