Mizuho: Japan Fgn Bond Selling Perspective - Buying Shouldn’t Be Far Away

Monday saw Mizuho note that “flow data from Japan continues to show net selling of foreign bonds. In Yen terms, the drawdown in cumulative flows is close to the peak seen three times over the past 20 years.”

• “Selling of U.S. Tsys has been the key driver. However, in contrast to the U.S. Tsy reduction during 2017/18, the latest flows have been much less of a foreign bond rotation, but rather more of a U.S. debt retreat.”
• “Overseas rates vol. is the primary concern; once the momentum fades there’s reason to expect more net neutral foreign bond flows, especially given the selling we’ve already seen… and this is the market phase we’re coming into. Most Japanese lifers seem to agree that 10-Year U.S. Tsy yields should end the year below 3%. There’s still comfort in JGBs given that domestics generally expect no near-term change in YCC.”