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Sumitomo Life to buy more foreign bonds without currency hedge in Oct-March

Published 23/10/2020, 06:35 pm
© Reuters.
USD/JPY
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US10YT=X
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AU10YT=RR
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* To add unhedged foreign bonds, possibly by a few hundred bln yen

* Expects currency-hedged foreign bond holdings to fall

* To increase domestic bonds by up to 180 bln yen in Oct-March

* Plans to boost holdings of Japanese, foreign stocks

* To buy stocks and bonds if market dips, incl after US election

By Tomo Uetake

Oct 23 (Reuters) - Japan's Sumitomo Life Insurance Co SMTLI.UL plans to increase the allocation for foreign bonds without currency hedge in its portfolio during the current fiscal half-year through March, a senior investment planning official said on Friday.

"As we expect the low rate environment is likely to stay, we will raise allocations to foreign currency credit products and risk assets to boost returns, while keeping invested in superlong Japanese bonds to limit interest rate risk," Toshio Fujimura, general manager of the investment planning department, said.

Sumitomo plans to boost holdings of such assets by a few hundred billion yen (a few billion dollars), with a focus on U.S. dollar and Australian dollar bonds, which offer relatively higher yields, he said.

The U.S. 10-year Treasury yield US10YT=RR stood at 0.85% while the Australian government debt AU10YT=RR yield 0.86%, compared with 0.035% JP10YTN=JBTC on the 10-year Japanese government bonds.

Increased foreign bond investment without currency hedge by big Japanese investors such as Sumitomo could put a brake on a rise in the yen.

The company expects the dollar/yen to move in a range of 100-112 yen for the October-March period, with its end-March forecast at 108 yen, unchanged from its forecast in April. The greenback was trading at 104.70 yen JPY= on Friday.

The company plans to reduce the currency-hedged part of foreign bonds investments instead in the Oct-March period.

Fujimura said Sumitomo also plans to increase holdings of domestic and international stocks, including investments through third-party mutual funds if their valuations become more reasonable after a market correction that, for example, might follw the U.S. presidential election in November.

The country's fourth-largest private life insurer also plans to increase holdings of domestic bonds, including superlong Japanese government bonds, by up to 180 billion yen in the current fiscal half.

Sumitomo Life's total assets stood at 34.2 trillion yen as of end-June.

($1 = 104.70 yen)

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