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CROSS ASSET
Some anecdotal evidence re: flow support for XXX/JPY crosses last week.
- The weekly international security flow data from the Japanese MoF revealed the largest round of net weekly purchases of foreign bonds since the initial outbreak of COVID in ’20 (~Y3.6tn).
- The chart below is one we have commented on relatively regularly in recent months.
- It shows that FX-hedged yields from the perspective of a Japanese investor re: the major bond markets disincentivises FX hedging activity when deploying capital in offshore paper.
- That means that the bulk of the flows were likely unhedged from an FX perspective, which would be a JPY negative.
- We won't get a clear idea of the destination of the flows until the monthly current account data for September is released.
- Note that we use a rolling 3-month FX hedge in our calculations.
Fig. 1: FX-Hedged Yields For Benchmark Global 10-Year Bonds From The Perspective Of A Japanese Investor Vs. JGB Yields
Source: MNI - Market News
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
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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