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The Offshore Outlook For Japanese FI Participants


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 (%)
U.S. 10-Year1.32431.6739
Germany 10-Year0.0757-0.325
France 10-Year0.326-0.075
Italy 10-Year1.09240.693
Spain 10-Year0.7420.341
UK 10-Year0.53520.773
Australia 10-Year1.57211.7498
Japan 10-Year--0.099
Japan 20-Year--0.462
Japan 30-Year--0.662
Japan 40-Year--0.704
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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