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Given the start of the new Japanese fiscal year plenty of attention has fallen on the potential for Japanese investors to deploy fresh capital into foreign bonds. Australia & the U.S. continue to present the most attractive destinations from an FX-hedged yield perspective, although the dynamics surrounding the broader reflation trade narrative and its impact on AUD/JPY (assuming that Japanese investors choose to enter a large proportion of Aussie bond positions from an FX-unhedged stance) may be key for allocation in the short term.
Fig. 1: Selected Foreign FX-Hedged (From The Perspective Of A Japanese Investor) & JGB Yields (%)
Source: MNI - Market News/Bloomberg
|FX-Hedged Yield (%)||Conventional Yield (%)|