Japanese lifers return to JGBs while eyeing U.S. credit and global alternative investment opportunities: The MUFG Global Markets Podcast

Japan's major life insurance companies recently released investment plans for the second half of fiscal year 2020. MUFG's Takahiro Sekido notes three themes: (1) a return to JGBs; (2) an interest in alternative investments and spread product; and (3) careful selection of foreign bonds that lack appeal when considering the need for improved asset efficiency and despite low FX hedging costs. Concurrently, the start of the second half of the fiscal year has seen uneventful price action in Japanese financial markets with JGBs, Dollar/Yen, and Dollar/Yen cross-currency basis all flat. Japanese investors were doing little more than adjusting positions ahead of the U.S. presidential election, so there was nothing to drive a JPY weakening. At the same time, cross-currency basis was favorable for JGB buying, and overseas investors turned to JGBs as a short-term USD asset management product, and fund flows did not push JPY higher. These mixed flows kept Dollar/Yen in a narrow range on the eve of the U.S. elections.

In this episode, MUFG Chief Japan Strategist, Takahiro Sekido, discusses Japanese lifers’ investment plans for the second half of fiscal year 2020 and their implications on JGBs, Dollar/Yen, and Dollar/Yen cross-currency basis.

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