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Westpac note that "as the RBA bond purchase program has moved from phase 1, through the current phase and, looking forward, is projected to extend for another year, the big question is whether the purchase would eventually create distortions from either the RBA owning too much of an individual bond, or by potentially squeezing out an investor cohort as the "free-float" of available bonds is diminished."
- "Given that there are regulatory and mandate considerations for domestic investors, the most obvious investor cohort this could impact would clearly be non-residents, of which the two most important are sovereign FX reserve managers and Japanese investors, both retail and wholesale. The attractiveness of FX-hedged spreads to JGBs (for Japanese investors) has diminished recently, however, they remain high relative to pre-pandemic opportunities and also relative to other alternative markets. Historically, when there is significant volatility or uncertainty in global markets, Japanese investors have pared back their risk seeking, only moving to take advantage of opportunities when calmer conditions prevail. We suspect that will remain the case."