Foreigners Resume JGB Short Covering

The latest round of Japanese weekly international security flow data suggested that the sizable covering of short JGB positions on the part of international investors resumed last week, after a one-week break, with net purchases comfortably topping the Y1tn mark for the third time in four weeks.

• The remaining net flows were fairly limited, including modest buying of foreign bonds by Japanese investors for a second consecutive week (which comes on the heels of a record 8 weeks of net sales, which was driven by elevated FX-hedging costs and market volatility), a seventh straight week of net purchases of international equities by Japanese investors and net sales of Japanese equities on the part of international investors (after 3 straight weeks of net purchases).