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[Tokio, 25, Reuters]- Although the yields of the currency-hedged US Treasuries have outperformed Japanese government bonds, investors in government bonds remain cautious regarding the change in the US Treasury. This is because the The difference in yield is still small and not at a level where the investment can be made with the risk of rising interest rates. However, there are many views that the interest rate differential will widen further in the future due to differences in business sentiment between Japan and the United States, and there is a possibility that the shift in US bonds will continue, including open investment without coverage. .
For the first time in about three years, the yield on US 10-year government bonds, including currency hedging costs, has exceeded that of Japanese 30-year government bonds. While yen bond yields have remained largely unchanged, total US bond yields have improved due to lower currency hedging costs and rising interest rates since last fall. Yields in the high range of 0.6% can be obtained.
The factors behind the increase in interest rates in the United States are the fiscal expansion of the Democratic Party, the expectations of economic recovery and the increase in inflation expectations. Fed Chairman Powell once “sealed” it, but remarks on the cut continue to burn. On the other hand, in Japan, the diffusion of vaccines is delayed and the economic recovery is expected to take time, and the expected inflation rate remains low.
While it is true that investing in US bonds is becoming more attractive to domestic investors, it is still not moving towards buying US bonds on a large scale. According to national foreign investment in medium and long-term bonds (according to designated reporting agencies) announced by the Ministry of Finance, net purchases were 736.2 billion yen on January 3-9, but the pace dropped to 272.4 billion yen on 10-16. .doing.
The average for the past two weeks is 504.3 billion yen per week. It exceeds the average of about 397 billion yen per week in 2020, but there is a possibility that there will be a reaction to the cumulative sales of 852.3 billion yen during the two weeks from December 20 to January 2. before that.
One of the reasons that domestic investors are hesitant to invest in US Treasuries is that, while interest rates have risen, they are not high enough to be worth the risk. “It’s not that attractive from the absolute level of interest rates. There is still a risk that interest rates will rise,” said Yusuke Onodera, director of financial planning at Fukoku Life Insurance Company.
The current performance difference is approximately 0.05% between 10 years in the US and 30 years in Japan. Foreign currency-hedged bonds are a substitute for yen interest rate assets, but the risk of rising interest rates remains. If you buy without currency hedging, you will get a return of more than 1%, but this time you will have currency risk. At the current dollar / yen level, if the yen strengthens to the 102 yen level, the gains (returns) will be lost.
There are other circumstances for national life insurance companies. It is a shift to an economic value base by applying the international capital standard in 2025. “For domestic institutional investors who are under pressure to extend the maturity of their bonds due to regulations, US Treasuries to 10-years are short and underperforming, while 30-year bonds are too volatile, “Pinebridge said.・ Tadashi Matsukawa, Managing Director of the Bond Management Investment Department, highlights.
In the market, it is widely believed that domestic pensioners are currently increasing investment in US Treasuries. “I think retirees are buying bonds due to the rebalancing of the portfolio as equity prices go up. This is probably not an aggressive buy,” said Masahiko Shun, director of bond management research at AllianceBernstein. If the share of shares increases due to rising share prices, it is the basis of portfolio management to increase and balance other assets.
<¿Se está ampliando el diferencial de tipos de interés entre Japón y Estados Unidos?>
Three years ago, in 2017, when the yield on US 10-year bonds, which also included currency hedging costs, outpaced the yield on Japanese 30-year bonds, Japanese investors began investing in US bonds on a large scale. with a slight delay. Yields reversed from February to March, but from May to September they bought more than 5.7 trillion yen.
“It appears to have moved after seeing that interest rate hikes had decreased. By industry, investment by retirees who generally don’t have currency hedging was increasing, and there were a lot of open investments,” said the chief interest rate strategist. Nomura Securities interest. ., Takenobu Nakajima Analysis.
Investors tend to be cautious when the risk of rising interest rates (falling bond prices) persists. “Japanese investors are particularly good at the range market. They are cautious when it comes to investing when the market turns suddenly, but when the market moves within the range, they tend to activate the trade calmly.” (Financial institution affiliated abroad).
Although the rise in US interest rates has recently stopped rising, there are many opinions in the market that the 10-year US Treasury yield will rise to around 1.3-1.5% in line with the recovery of the US economy. On the other hand, in Japan, the Bank of Japan will refrain from “inspecting” in March, but there are many opinions that the upward pressure on interest rates will not continue even if the amount of purchases of government bonds is reduced. a little while the economic recovery and the inflation rate do not increase.
In fact, when the Bank of Japan widened the fluctuation range of long-term interest rate manipulation from 0.1% to 0.2% in July 2018, the 30-year bond yield was 0 , 95% from the high range of 0.6% through October. to 0.705% at the end of the year, below the level of the beginning of the year.
There are many domestic investors who have to buy yen bonds according to their assets from an ALM (asset and liability management) point of view, but after the widening interest rate gap between Japan and the United States has decreased, the United States includes open investment. There is also the possibility that the bond exchange will progress slowly.
Edited by Daiki Iga: Hitoshi Ishida
