MNI POLICY: Japan Dai-ichi Life To Boost Yen Bond Buys In H2

Dai-ichi Life Insurance plans to increase its holding of yen bonds in the October-March period, building on increased holdings in the first half of the fiscal year, the company's lead fund manager said Tuesday.

The firm plans to increase its balance of JGBs regardless of interest rate levels, although accelerating its pace of purchases if yields rise, Akifumi Kai, general manager of the Investment Planning Department, told reporters. It also plan to increase investments in project and asset finance to boost returns.

Dai-ichi, Japan's second largest life insurer by assets, expects 10-year JGB yield to move in a range of -0.20% to 0.20% in this fiscal year and the firm .

FLEXIBLE ON FOREIGN BONDS

According to Kai, the lifer is also ready to be more flexible in its approach to buy hedged and unhedged foreign bonds investments, depending on interest and forex rate levels. Dai-Ichi increased its hedged foreign bond holdings in H1. He indicated the firm will, dependent on hedging costs, increase hedged foreign bond purchases when yields approach the upper level of an expected range.

The balance of hedged foreign bonds accounted for 19.4% of total asset and the balance of unhedged foreign bonds accounted for 6.1% at end-June. Within its foreign bond holdings, government and regional bonds accounted for 53.4%, corporate bonds accounted for 25.6% and MBS accounted for 21.0%.

Dai-ichi Life continues to mainly invest in corporate bonds with a BBB or higher rating, with mortgaged-backed securities as an
alternative.

The company trimmed its unhedged foreign bond holdings in the April-September period as the firm changed the asset allocation due to forex moves. The company didn't elaborate further on how positioning may change due to internal compliance rules. Japan's lifers favor long-term yen assets to match liabilities, with hedged foreign bonds an alternative when domestic rates are low.

Through end-June, the balance of yen bonds rose to JPY16.14 trillion, or 44.1% of its total asset, up from JPY15.87 trillion at the end of March. The balance of foreign currency assets totaled JPY10.43 trillion, or 28.5% of its total asset, from JPY9.57 trillion at the end of March. Total assets at the end of June totaled JPY36.65 trillion, up from JPY35.65 trillion at the end of March.

The company expects the dollar to move in a range of JPY100 to JPY110 and euro to move between JPY115 and JPY135 in this fiscal year. The company expects the U.S. Treasury 10-year to move in a range of 0.00% to 1.50%.