Japanese investors extend foreign bond selling streak to six weeks

Japanese investors withdrew funds from foreign long-term bonds for a sixth consecutive week through Oct 24, though the recent drop in Treasury yields from around 24-1/2-year highs slowed the pace of selling.

They sold a net ¥92.6 billion (US$586.56 million) of foreign long-term bonds during the week, their smallest weekly net sales in six weeks, while buying a net ¥235.3 billion in short-term bills, reversing net sales of ¥136.9 billion the previous week, finance ministry data showed.

The benchmark 10-year US Treasury yield, which hit a 24-1/2-year high of 5.3645% earlier this month, has since fallen about 37.2 basis points.

Traders have been closely watching Japanese investors’ recent selling in global fixed income markets for signs that rising yields at home are drawing back enough money to Japan to move domestic and foreign markets.

Japanese investors have sold a net ¥5.27 trillion of foreign long-term bonds so far this year, the heaviest selling for the period since 2022.

They, meanwhile, bought a net ¥288.1 billion of foreign equities, marking their sixth weekly net purchase in the past seven weeks.

At the same time, Japanese stocks drew ¥1.18 trillion in foreign inflows, reversing marginal outflows of ¥67.5 billion the previous week.

Nikkei’s low last week of 61,462.61 held just above its 200-day exponential moving average of around 61,367.

Foreign inflows into Japanese long-term bonds totalled ¥43.3 billion during the week, a four-week low, while short-term bills posted a second consecutive weekly outflow of ¥1.18 trillion.