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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JAPAN DATA
Local Japanese investors have stepped up their purchases of offshore bonds considerably in recent weeks. In the past 4 weeks we have seen ¥5.6trln in net purchases. This is the strongest run rate for such a period since early 2020 (when the Covid pandemic hit).
- The first chart below plots the rolling 12 week sum of net flows into offshore bonds against the Bloomberg series for Global bond returns. On this longer dated metric, outflows have just returned to positive territory. This has also coincided with a more positive return for global bonds, with a number of central banks pivoting towards easing or signaling strong intent to do so (ex Japan).
- Outflow momentum is well below previous cycle peaks though, so from a trend perspective may have more room to run. A lot will obviously depend on the Fed and how its actual rate cut easing cycle evolves relative to current market pricing.
Fig 1: Japan Purchases Of Offshore Bonds (12wk Rolling Sum) & Global Bond Returns
Source: MNI - Market News/Bloomberg
- Making such outflows slightly more attractive is a reduction in hedging costs, which is also being aided by market pricing shifts in the terms of central bank outlooks.
- The second chart below presents USD/JPY hedging costs (%) for the 1 month, 6month and and 12 month tenor. We are off highs but still elevated by historical standards.
Fig 2: USD/JPY Hedging Costs Off Cycle Highs
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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