MNI: Japan's Sumitomo Life Eyes Yen, Unhedged Foreign Bond Buys

Japan's Sumitomo Life will look to increase holdings of yen bonds, including 30- and 40-year Japanese government bonds, and unhedged foreign bonds, such as U.S. dollar corporate bonds, for the October-March period, the company's chief fund manager said Tuesday.

The firm plans to increase the balance of domestic bonds by about JPY100 billion after increasing the balance by JPY110 billion for the April-September period, Toshio Fujimura, general manager of Investment Planning Department at Sumitomo Life, told reporters.

He added that Sumitomo Life will accelerate its purchases of 30- and 40-year JGBs, if those bond yields rise without elaborating specific yield levels.

Fujimura said that the company increased its purchase of hedged sovereign bonds and mortgaged-bonds for the April-September period, but the balance of hedged foreign bonds fell in the wake of the redemption of hedged government bonds.

Fujimura expects new assets from insurance premiums for the October-March period to increase the same size of about JPY400 billion for the April-September period. At the end of September, Sumitomo Life's assets are estimated at JPY34.91 trillion, up from JPY34.64 trillion at the end of March.

Also see: MNI: Japan Nippon Life To Boost Yen Bond Holdings In FY2021 2H for the latest update on its investment plans.

UNHEDGED FOREIGN BONDS

As for unhedged foreign bonds, Fujimura said that the company plans to increase purchases by several hundreds of billion yen in the second half of this fiscal year.

"Looking ahead, hedging costs will likely rise (in the U.S. and Europe), which will make it difficult for us to buy sovereign bonds. We plan to buy corporate bonds to seek higher returns," Fujimura said.

The company is also willing to buy unhedged foreign bonds if the yen strengthens from recent levels, he said.

THE YEN

But he doesn't see a big risk of the yen's rise, judging from an interest rate gap between the U.S. and Japan.

"The dollar is a little higher as the currency is affected by inflationary fears," Fujimura said. The "inflation rate is expected to calm down and the yen will likely rise a bit."

The company expects the dollar to trade between JPY102 and JPY117 and the euro to move in a range of JPY115 to JPY145 this fiscal year. It sees the 10-year JGB yield to move between -0.05% and +0.15% and the U.S. Treasury 10-year yield to move in a range of 1.00% to 2.00%.