Japanese investors sold the largest amount of overseas bonds since 2024 last month, as market watchers scrutinize flows for signs that higher domestic yields were triggering repatriation.
Net sales totaled ¥3.42 trillion ($21.8 billion) in February, based on preliminary weekly figures from the Ministry of Finance released on Thursday. That’s the largest monthly sale since October 2024, according to separate balance-of-payments data. The bulk of the sales took place in the week ended Feb. 20.
“With declines in Japanese government bonds forcing life insurers to book impairment losses, they may be managing overall profits by realizing gains on foreign bonds,” said Ayako Sera, senior market strategist at Sumitomo Mitsui Trust Bank in Tokyo. “Demand for foreign bonds has probably moderated” given the rise in domestic yields, she said.
An auction of 30-year JGBs on Thursday indicated that investor appetite for Japanese bonds may be on the mend after the recent selloff, with the bid-cover gauge for demand exceeding the 12-month average. Japan’s benchmark 10-year yield fell 13 basis points in February, marking the first decline in eight months.
“We’ve been selling low-yield foreign bonds and shifting them into yen-denominated bonds since last April,” said Hiroe Oizumi, general manager of the fixed income group at Fukoku Mutual Life Insurance’s securities investment department. “We plan to maintain the current position for the time being, adjusting the balance based on foreign exchange trends.”