Japanese investors net sellers of foreign bonds in May -Breaking
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(Reuters) – Japanese investors sold foreign bonds net for the third month consecutively in May. This was due to concerns about central bank aggressive monetary tightening.
Japan’s Ministry of Finance Data showed that domestic investors sold overseas bonds for a net of 1.29 trillion Japanese Yuan ($9.66 Billion), following sales of net 2.19 Billion yen in April.
(Graphic on, Japanese investments in overseas assets: https://fingfx.thomsonreuters.com/gfx/mkt/zdvxowznjpx/Japanese%20investments%20in%20overseas%20assets.jpg)
According to data from Bank of Japan, domestic investors purchased 7.78 trillion dollars worth of U.S. debt and 1.41 trillion trillion euros of European bonds within the first quarter of 2011.
(Graphic on, Japanese investments in US and European assets: https://fingfx.thomsonreuters.com/gfx/mkt/movanzgldpa/Japanese%20investments%20in%20US%20and%20European%20assets.jpg)
After a rise in U.S yields, and worries about more Fed rate increases, the Japanese yen fell to a twenty-year low against the US dollar.
Widening policy divergence has made the Japanese currency more difficult to handle, and the Bank of Japan is one of few central banks worldwide that maintains a cautious stance. [FRX/]
Adam Cole, RBC Capital Markets’ chief currency strategist, stated in a note that “there appears to be very little Japanese participation at the rally so far.”
Local investors were selling foreign bonds and buying JPY all through this move. Hedge ratios may only have just begun to decline, reflecting an increase in hedge costs, which are still at an early stage.
The data revealed that Japanese investors in foreign stocks were net buyers for May, having reduced their holdings over the past two months.
($1 = 133.5200 yen)
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