MNI: Japan Dai-ichi Life To Up Unhedged or Hedged O'seas Bonds

--Dai-ichi Life: To Mull Buying Unhedged Foreign Bonds Flexibly 

--Dai-ichi Life: To Lower Yen Bond Holdings in H2 of FY18

     TOKYO (MNI) - Dai-ichi Life Insurance, Japan's second largest life insurer

by assets, will likely increase the balance of either unhedged or hedged foreign

bonds for the October-March 2019 period, the firm's chief fund manager said

Friday.

     The company plans to lower the balance of yen bond holdings during the

period, as yen interest rates, based on the Bank of Japan easy policy, are too

low to make them an attractive investment, Kazuyuki Shigemoto, general manager

of the Investment Planning Department at Dai-ichi Life, told reporters.

     "We increased the balance of hedged foreign bonds (for the April-September

period). But hedging costs are rising now, so as for dollar assets, we will

consider buying unhedged foreign bonds, mainly U.S. corporate bonds and

mortgaged-backed securities, in a flexible manner" Shigemoto said.

     He explained that if the company bought U.S. Treasury 10-year bonds with

hedging for three months, its return would be zero.

     "Looking ahead, U.S. hedging costs will continue rising. Lowering the

balance of hedged foreign bonds means we increase unhedged foreign bond

holdings, while closely watching developments in foreign exchange rates,"

Shigemoto said.

     His comments indicate that if the yen appreciated toward Y105, the upper

range of Y105 of Y115 that Dai-ichi predicts, the firms would increase purchases

of unhedged foreign bonds.

     --NORMAL YEN PREFERENCE

     Japan's life insurance firms favor long-term yen assets that match their

long-term yen liabilities, but consider investments in hedged foreign bonds as

an alternative to yen bond holdings when domestic rates are low.

     Shigemoto added, "We don't expect the yen to rise sharply and will consider

buying unhedged foreign bonds, mainly U.S. dollar assets, flexibly.

     Dai-ichi life plans to further lower the balance of yen bond holdings for

the October-March period after reducing their for the April-September period.

     "The balance of yen bond holdings fell in the wake of redemptions. We will

increase investment in other yen assets, such as project or asset finance, for

the second half of this fiscal year. But the overall balance of yen bonds will

fall due to expected redemptions," Shigemoto said.

     The company refrained from buying Japanese government bonds, but it will

buy 30-year bonds, if the yield rose to near 1.4%. Late Friday, the 30-year JGB

bonds were trading at 0.860%.

     Dai-ichi expects the 10-year JGB yield to move in a range of 0.00% to 0.20%

in the current fiscal year.

     The company expects the U.S. Treasury 10-year bond yield to move between

2.80% and 3.50%, on the premise that the U.S. Federal Reserve Board will

continue raising interest rates.

     Dai-ichi expects the dollar will trade between Y105 and Y115 to the yen and

the euro will fluctuate between Y120 and Y140.

     As of the end of June, Dai-ichi's assets totaled Y35.29 trillion.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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