Barclays have noted that "Japanese banks are...>

JGBS: Barclays have noted that "Japanese banks are turning cautious on overseas

investment and reducing their dependence on FX/currency swaps in foreign

currency funding. Likewise, life insurers are curbing their investment in

FX-hedged USTs due to high USD funding costs and shifting into FX-hedged

European bonds and repatriating to JGB with the rise in superlong yields. In

this context, it is difficult to see USDJPY xccy basis widening again like in

2013-16, aside from seasonal widening at year-end, as seen currently. Although

dip-buying by life insurers could lend support when the USDJPY falls, they

maintain a cautious FX outlook overall and are thus unlikely to chase it higher.

We believe superlong JGBs (especially 30y) are likely to draw support at some

level from a passive repatriation into JGBs and retain our "10y/20y/30y fly

short (selling the body)" recommendation."