Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

UPDATE 1-Dai-ichi Life may add foreign bonds without FX hedging when dollar falls below 112 yen

Published 26/10/2018, 06:04 pm
UPDATE 1-Dai-ichi Life may add foreign bonds without FX hedging when dollar falls below 112 yen
USD/JPY
-
US10YT=X
-
8750
-

* Mulls to buy unhedged foreign bonds when yen strengthens

* No plan to buy JGBs, sees current yields too unattractive

* To continue selling Japanese stocks for risk control (Adds detail, more comments)

By Tomo Uetake

TOKYO, Oct 26 (Reuters) - Japan's Dai-ichi Life Insurance 8750.T will consider buying foreign bonds without currency hedging when the dollar weakens below 112 yen, senior executives said on Friday.

The dollar last traded at 112.20 yen JPY=EBS . Although the insurer sees little upside for the dollar from the current level, it does not anticipate a sharp fall in the dollar below 105 yen during the period, they said.

Dai-ichi Life is Japan's second-largest private life insurer and the core firm of Dai-ichi Life Holdings 8750.T , with 37 trillion yen ($330 billion) of assets under its management.

As hedging costs on dollar bonds have risen and are seen remaining high, Dai-ichi expects its currency-hedged foreign bond holdings to likely fall in the six months to March 2019, Kazuyuki Shigemoto, general manager of investment planning, told reporters.

The three-month hedging cost shot up in late September to around an annualised 3.30 percent, more than the current 10-year U.S. Treasuries yield of around 3.10 percent US10YT=RR .

Within the hedging foreign debt space, Dai-ichi looks for a rotation from U.S. Treasuries into European bonds, for which Japanese investors can earn premium, and high-yielding Australian and New Zealand bonds.

Market players closely watch Japanese investors' stance on foreign bonds and currencies. They have bought foreign bonds aggressively in recent years as an alternative to low-yielding domestic debt, including Japanese government bonds.

Dai-ichi added its domestic bond holdings are likely to fall further in the October-March period as the insurer expect their yield remain low.

"We don't see super-long JGBs as our realistic investment options for now. The 20-year yield around 0.6 percent and the 30-year around 0.9 percent are way too unattractive for us," Shigemoto told reporters.

But Dai-ichi also thinks an economic downturn is looming on the horizon of the U.S. economy.

"U.S. enonomy has been at full employment for 22 months already. From past records, we think a recession is possible in about a year or two," said Shigemoto.

With an eye on that, Dai-ichi plans to reduce its holdings of domestic stocks in the six months through March.

"The stocks have been sold heavily recently but when they bounce back, we plan to sell and lock in profits for risk control reasons," he added.

Dai-ichi also plans to continue adding alternative assets, including hedge funds, private equities and real estates. ($1 = 112.20 yen)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.