Japanese investors sell foreign bonds for fifth straight week, eye home market

Oct 22 : Japanese investors sold foreign bonds for a fifth straight week, their longest selling streak in four years, marking the latest sign of a potential shift in allocation strategy as rising yields at home spur buying in Japanese government bonds.

The surge in the benchmark Japanese 10-year bond yield, up over 80 basis points this year, is starting to tease capital home, although recent safe-haven buying has pulled yields away from the three-decade high it hit in October.

Japanese investors sold a net 161.6 billion yen ($1.02 billion) of foreign long-term bonds through October 17, the smallest quantum in the streak, alongside 156.9 billion yen of short-term bills, Japan's Ministry of Finance data showed.

The pace of selling slowed as US Treasury yields eased from multi-decade highs, as investors sought safety in bonds from the ruction in the stock market over AI worries.

The benchmark 10-year US yield retreated by roughly 27 basis points from a 24-1/2-year high of 5.3645 per cent hit earlier this month.

Meanwhile, the 10-year French government bond yield climbed to a 24-year high of 5.022 per cent on Wednesday amid concerns over widespread protests in France.

The latest sales brought Japanese investors' total net disposals of foreign long-term bonds over the five weeks to about 3.43 trillion yen, taking year-to-date net sales to 5.18 trillion yen, the largest for the comparable period since 2022.

Domestic Japanese banks have led this year's selling, while life insurers have signalled plans to maintain or increase their domestic bond purchases in the second half of the fiscal year.

Investor focus this week will be on the investment plans from life insurers, who manage about $2.5 trillion in assets, about a quarter of which is held overseas, according to the Life Insurance Association of Japan.

In overseas equity markets, Japanese investors made net purchases of 128.3 billion yen in foreign stocks, marking their fifth weekly net buying in the past six weeks.

Meanwhile, foreign investors were net buyers of Japanese long-term bonds for a third consecutive week, purchasing a net 1.45 trillion yen during the week.

However, they sold 2.24 trillion yen of short-term bills, the largest weekly disposal in three weeks.