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Free AccessMNI: Japan's Sumitomo Life To Up Foreign Bond Buying In FY18
--Sumitomo Life: To Buy Unhedged Foreign Bonds If Yen Rises
--Sumitomo Life: To Restrict Investment in Super Long-Term JGBs
--Sumitomo Life: But To Buy Longer-Term JGBs If Yields Rise
TOKYO (MNI) - Sumitomo Life Insurance, Japan's fourth largest life insurer
by assets, plans to increase the balance of its foreign bond holdings further in
fiscal 2018 after increasing the balance by Y1.38 trillion in the last fiscal
year, the company's chief fund manager said Wednesday.
As for hedged foreign bond investment, the company is more focused on euro
and Australian dollar bonds than U.S. Treasuries, as the U.S. dollar hedging
costs have been rising, Iwao Matsumoto, senior executive officer and general
manager of the Investment Planning Department at Sumitomo Life, told reporters.
--UNHEDGED FOREIGN BONDS
He added that the company stands ready to buy unhedged foreign bonds if the
yen appreciates against the dollar.
The company will continue to shift investment to unhedged foreign bonds
from hedged foreign bonds as hedging costs are rising, while carefully
monitoring foreign exchange rates, Matsumoto said.
Sumitomo will also continue restricting investment in domestic bonds,
especially super long-term Japanese government bonds, as yen bond yields are
expected to stay at low levels.
But in fiscal 2017 to March 31, 2018, it increased the balance of its
holdings of total domestic public and corporate bonds by Y120 billion to Y13.04
trillion, which accounted for 42.8% of its total assets.
--LONGER-TERM JGBS
The company will consider increasing investment in super long-term JGBs if
their yields rise and selling medium- to long-term bonds at the same time,
Matsumoto said.
Sumitomo raised its holdings of foreign bonds (including corporate bonds),
mainly hedged ones, by about Y1.38 trillion to Y8.80 trillion, or 28.9% of its
total asset, in fiscal 2017, he said.
About 80% of the increase were hedged foreign bonds, 30% of which were in
U.S. corporate bonds, 60% in euro bonds and 10% in Australian and New Zealand
dollar bonds.
The remaining 20% of the increase were unhedged U.S. government and
corporate bonds.
Sumitomo Life will try to control risks linked to foreign exchange rate
fluctuations "in a flexible manner," Matsumoto said without elaborating.
Life insurance firms favor long-term yen assets that match their long-term
yen liabilities. They consider investment in hedged foreign bonds as an
alternative to yen bond holdings.
Sumitomo expects the 10-year JGB yield to move between -0.10 and +0.20 and
the U.S. Treasury 10-year yield to move in a range of 2.30% to 3.30% in fiscal
2018.
The 10-year JGB yield traded at around 0.050% Wednesday.
Sumitomo expects the dollar to trade between Y100 and Y120 and the euro to
move in a range of Y125 to Y150 in the current fiscal year.
It forecasts the Japanese economy will grow 1.4% this fiscal year and the
U.S. economy will expand 2.7% this calendar year.
On March 31, Sumitomo Life's assets totaled Y30.42 trillion, up Y1.91
trillion from the end of March 2017. During the same period, unrealized profits
in securities held by Sumitomo rose Y40 billion to Y3.34 trillion.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com
[TOPICS: M$A$$$,M$J$$$,MT$$$$,M$$FI$,MN$FI$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
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.