MNI: Japan Sumitomo Life Plans To Up Foreign Bonds In FY19

--Sumitomo Life: Focused on Unhedged, Hedged Foreign Bonds 

--Sumitomo Life: To Restrict Investment in Super Long JGBs 

--Sumitomo Life: But To Buy 30-Yr JGBs If Yield Rise to 1.5%

     TOKYO (MNI) - Japan's Sumitomo Life Insurance plans to increase the balance

of its foreign bond holdings by more than Y240 billion in the current fiscal

year after increasing the balance by the same amount in FY18, the company's

chief fund manager said Tuesday.

     The company also plans to increase the balance of domestic bond holdings by

about Y240 billion this fiscal year, again after a similar size purchase last

year.

     "Domestic interest rates are likely to stay at low levels and we will

restrict investment in super long-term Japanese government bonds. But we will

buy super long-term bonds, if interest rates rise," Toshio Fujimura, general

manager of Investment Planning Department at Sumitomo Life, told reporters.

     Sumitomo life plans to increase the balance of both hedged and unhedged

foreign bond holdings, mainly corporate bonds, to seek high returns.

     As for hedged foreign bond investments in FY19, the company is focusing

more on corporate bonds in Europe and the U.S. than government bonds, as dollar

hedging costs are high, Fujimura said.

     Fujimura also indicated that the company stands ready to buy unhedged

foreign bonds, when the dollar-yen exchange rate trades below Y100, the lower

end of Sumitomo's expected Y100 of Y120 range.

     --CAUTION OVER JGBS

     The company will continue to restrict investment in domestic bonds,

especially super long-term bonds, as yen bond yields are expected to stay at low

levels, after increasing the balance of public and corporate bonds by Y240

billion to Y13.34 trillion, or 41.7% of its total asset, during the last fiscal

year.

     However, the company will consider increasing investment in 30-year JGBs,

if their yields rise (30-year bond yield near 1.5%), he said.

     The 30-year bonds traded at around 0.575% earlier Tuesday and the 40-year

bonds traded at around 0.610%.

     Fujimura expects the 10-year JGB yield to move between -0.20% and +0.20% in

the current fiscal year and the U.S. Treasury 10-year yield to move in a range

of 2.00% to 3.00%.

     Japan's fourth largest life insurer by assets raised its holdings of

foreign bonds (including corporate bonds) to Y9.39 trillion, or 29.4% of its

total assets, for the fiscal 2018.

     --FRESH FUNDS

     Fujimura expects new assets from insurance premiums in the current fiscal

year to be about Y600 billion, although it fluctuates, depending on sales of

insurance products, compared with about Y1.21 trillion including funding through

repo markets, in the last fiscal year.

     The company expects the dollar to trade between Y100 and Y120 and the euro

to move in a range of Y115 to Y140 for the current fiscal year.

     Life insurance firms favor long-term yen assets that match their long-term

yen liabilities. They consider investments in hedged foreign bonds as an

alternative to yen bond holdings.

     At the end of March, Sumitomo Life's assets totaled Y31.99 trillion, up

Y1.21 trillion at the end of March 2018.

--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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