Key Takeaways
- • Japanese institutional investors boosted net purchases of domestic government bonds (JGBs) to ¥18.8tn ($119bn) in the fiscal first half, the highest level since 2009, according to Japan Securities Dealers Association data cited by Bloomberg.
- • Trust banks, which typically act on behalf of pension funds, accounted for almost half of the buying, while banks contributed roughly one-third.
- • Trust bank accounts bought ¥10.1tn of foreign bonds over the six-month period, while domestic banks sold a net ¥7.4tn, their largest net disposals since at least 2014.
- • Mitsubishi UFJ Morgan Stanley's Keisuke Tsuruta attributed the shift to public pension rebalancing after strong equity performance and yen depreciation.
- • Demand was strong at a Tuesday auction of 20-year JGBs, which drew record demand.
Summary
Japanese institutional investors increased purchases of domestic government bonds to their highest level since 2009 during the six months to September, as pension fund rebalancing and rising global bond yields reshaped fixed income allocations, according to Bloomberg. Net purchases of JGBs totalled ¥18.8tn ($119bn) in the fiscal first half, according to data from the Japan Securities Dealers Association. Trust banks, which typically manage assets on behalf of pension funds, accounted for almost half of the buying, while banks contributed approximately one-third.
Keisuke Tsuruta, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, attributed the increase to portfolio rebalancing by public pension funds following strong equity market performance and yen depreciation, which prompted allocations to shift from equities into bonds. Demand remained robust at Tuesday's 20-year JGB auction, which attracted record demand.
Flows into overseas fixed income diverged sharply. Trust bank accounts purchased ¥10.1tn of foreign bonds over the period, while domestic banks sold ¥7.4tn, their largest net disposals since at least 2014. Tsuruta said expectations that higher oil prices would push up yields had encouraged banks to reduce exposure to US Treasuries and European government bonds, while domestic bond purchases were partly driven by the need to generate returns on deposit funding.
The data underscore how inflation pressures, currency movements and rising yields are reshaping institutional positioning across global sovereign debt markets.
Keisuke Tsuruta, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, attributed the increase to portfolio rebalancing by public pension funds following strong equity market performance and yen depreciation, which prompted allocations to shift from equities into bonds. Demand remained robust at Tuesday's 20-year JGB auction, which attracted record demand.
Flows into overseas fixed income diverged sharply. Trust bank accounts purchased ¥10.1tn of foreign bonds over the period, while domestic banks sold ¥7.4tn, their largest net disposals since at least 2014. Tsuruta said expectations that higher oil prices would push up yields had encouraged banks to reduce exposure to US Treasuries and European government bonds, while domestic bond purchases were partly driven by the need to generate returns on deposit funding.
The data underscore how inflation pressures, currency movements and rising yields are reshaping institutional positioning across global sovereign debt markets.
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