Latest news with #lifeInsurers
Japan Times
6 days ago
- Business
- Japan Times
Japanese life insurers cut bullish yen hedges to 14-year low
Japanese life insurers cut protection for their foreign assets against a stronger yen to a fresh 14-year low, signaling subdued expectations of a sustained rally in the nation's currency. Nine of Japan's biggest life insurers collectively lowered bullish yen wagers tied to their foreign investment holdings to 44.4% at the end of the fiscal half in March, compared with 45.2% six months earlier, according to an analysis of their earnings reports. While U.S. President Donald Trump's administration's unpredictable policymaking has stoked foreign exchange market volatility, that wasn't enough to stop a three-year decline in yen hedging. The Bank of Japan's policy interest rate is still 3 percentage points lower than the nation's inflation rate, with the next potential hike seen further delayed. The continued decline in hedging suggests "life insurers see a lower likelihood of the yen showing the kind of strength it did in the past, and feel a need to hold unhedged overseas bonds to maintain exposure to foreign exchange risks,' said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank in Tokyo. "The yen's real interest rates are just too low.' Still-high currency hedging costs are also weighing on life insurers' demand for overseas debt. Japan's 10-year notes yield more than 150 basis points on a compounded basis, much more than counterparts in the United States, United Kingdom, Germany and Australia once foreign exchange protection costs are taken into account, data shows. Life insurers offloaded a net ¥756 billion ($5.3 billion) worth of foreign bonds in the six months through March 31, Finance Ministry data showed. That marks the seventh consecutive such period of sales. Insurers dumped a net ¥21.2 billion of overseas stocks in the October-March period after buying ¥1.06 trillion in the six months through Sept. 30. A gauge that measures the yen's strength against currencies of Japan's major trading partners rose to a six-month high at the time amid broad weakness in the greenback. But the currency failed to hold gains and finished the second half of the fiscal year 1.6% lower as the BOJ added a reference to trade policies to its list of risks to the outlook for the economy and inflation. The likelihood of an interest-rate hike shrank further as the central bank this month delayed the expected timeline for reaching its inflation target. Overnight-indexed swaps signal a 64% chance of the central bank raising interest rates by 25 basis points by the end of the year. At the end of January, markets were fully expecting a quarter point hike or more by December. The yen's nominal effective exchange rate has edged up 0.8% since March 31. Asset managers and leveraged funds collectively boosted net yen longs to a record via futures and options earlier this month amid speculation the Trump administration's tariff policy will hit the global economy and fuel demand for haven assets. Unhedged positions risk causing losses should a drop in foreign currencies wipe out capital and income gains from overseas assets. That may prompt life insurers to rush for currency hedging, in turn exacerbating the slump in foreign currencies against the yen. Swaps, meanwhile, indicate an 83% chance of the U.S. Federal Reserve resuming rate cuts as early as September. Lower U.S. interest rates typically help reduce dollar hedge costs for Japanese investors, which are largely driven by the rate gap between the two economies. For this reason, "I see a rebound in demand for currency hedges going forward,' said Tsuyoshi Ueno, executive research fellow at NLI Research Institute in Tokyo.
CNA
28-05-2025
- Business
- CNA
Super-long JGB yields extend climb from multi-week lows after weak auction
TOKYO :Long-dated Japanese government bond yields rose further from three-week lows on Wednesday, after demand at a closely watched 40-year bond auction dropped to its lowest level since July. The 40-year JGB yield jumped 9 basis points (bps) to 3.375 per cent, as of 0514 GMT, rebounding sharply from 3.285 per cent on Tuesday, its lowest point since May 7. The 30-year JGB yield advanced 10 bps to 2.93 per cent, from 2.83 per cent on Tuesday, which was the lowest level since May 2. The 20-year yield bounced 8 bps to 2.415 per cent, after tumbling to a three-week low of 2.31 per cent in the prior session. The bid-to-cover ratio, which measures total bids relative to the amount of securities offered, fell to 2.21 from 2.92 at the previous 40-year bond auction in March. The auction was closely watched for signs of a recovery in demand after an aggressive selloff last week saw super-long JGB yields spike to record highs, with support from traditional buyers of long-dated securities absent as life insurers and pension funds trim purchases this year. Analysts said the sharp drop in yields on Tuesday, after a Reuters report that the Ministry of Finance was considering cutting super-long bond issuance to ease market pressure, made the bonds overpriced, deterring buyers at the auction on Wednesday. "The soft auction result and market reaction likely fan expectations for the MOF to further tweak the sizes of super-long-end auctions," with increased issuance of 2-year or 5-year paper as a likely result, said Frances Cheung, head of FX and rates strategy at OCBC. The Bank of Japan is unlikely to alter its quantitative tightening plans to support the bond market at this stage, "but should long-end yields increase more rapidly, some shifts ... cannot be ruled out," he said. BOJ Governor Kazuo Ueda said on Wednesday that the central bank will watch whether swings in super-long yields have a knock-on effect for shorter maturities, which have a larger impact on economic activity. Japanese Finance Minister Katsunobu Kato reiterated on Wednesday that he is closely monitoring developments in the bond market, echoing similar remarks made the previous day. Last week, 30- and 40-year JGB yields hit record peaks at 3.185 per cent and 3.675 per cent, respectively, while the 20-year yield hit a multi-decade high of 2.60 per cent. Yields had been rising steadily for weeks, but selling pressure intensified abruptly amid growing concerns over debt levels in major developed economies, particularly Japan and the United States. The 10-year JGB yield gained 6.5 bps to 1.525 per cent on Wednesday, after dipping to 1.455 per cent for the first time since May 16 in the previous session. The five-year yield rose 4.5 bps to 1.045 per cent, while the two-year yield added 2 bps to 0.75 per cent. Benchmark 10-year JGB futures fell 0.66 yen to 138.79 yen.
Reuters
28-05-2025
- Business
- Reuters
Demand at 40-year JGB auction sinks to lowest since July
TOKYO, May 28 (Reuters) - Demand at an auction of 40-year Japanese government bonds on Wednesday fell to the lowest since July, amid a selloff in so-called super-long debt this month. A measure of demand called the bid-to-cover ratio, which gauges total bids against the amount of securities on offer, sank to 2.2 from 2.9 at the previous sale in March. Japan's Ministry of Finance sold about 500 billion yen ($3.46 billion) of the bonds at Wednesday's auction. The 40-year JGB yield spiked to a record 3.675% last week as worries about the debt load in Japan and other developed markets like the United States led to a sell-off in the longest-dated bonds. Super-long JGBs lacked the support of traditional buyers like life insurers and pension funds, who have been scaling back purchases. ($1 = 144.5200 yen)
