Overnight we flagged huge net flows from......>

BONDS: Overnight we flagged huge net flows from Japan into foreign bonds in the

latest weekly international security flow data. A net Y4.2403tn. At the time we

highlighted this as the largest round of net weekly purchases of foreign bonds

by Japanese investors on record & by quite some margin. Since then, there has

been speculation that the national pension giant, the GPIF, is the driver behind

the move. This would make sense, on a couple of fronts.

- One Nomura trader, speaking with the FT, has noted that he "would not be

surprised if the GPIF had been buying, partly to slow down the pace of yen

appreciation." Remember, the USD/JPY cross traded on the Y101 handle on Monday,

towards the lower end of Japanese policymakers' perceived tolerance band.

- The fund is widely expected to lift its foreign bond holding levels to as much

as ~25%, notably higher than the current ~15%, which is huge, especially when

you account for the funds AUM (~Y160tn). Suggestions are that this move could be

formally outlined as soon as this month. A BofA strategist, also speaking with

the FT, noted "timing wise it is interesting... normally they would want to

bring the allocation close to the new target before they announce."