Japan Bond-Buying Accelerates
Japanese investors are buying foreign bonds again, and with US 10 yields approaching a multi-year high overnight, we would not be surprised if this trend continues.
The latest official data from the Ministry of Finance show six consecutive weeks of outflows. This took net buying of foreign portfolio assets for July as a whole to a 22-month high.
Seasonal factors are at work to some degree. But this change of heart is largely due to a combination of rising yields abroad and low yields at home. And JGB yields are likely to remain subdued given the BoJ’s commitment to buy more JGBs than Japan’s Ministry of Finance currently plans to issue (net of redemptions and buybacks). The JGB “free float” is shrinking.
Read the full report: UBS