Foreign investors pile into JGBs as yields settle, BOJ hike fears ease

[TOKYO] Foreign investors heavily bought Japanese government bonds (JGBs) last week, drawn by relatively higher yields after January’s sharp sell-off eased – and on hopes the Bank of Japan may not rush further rate hikes.

They bought long-term Japanese bonds worth 1.89 trillion yen (S$15.31 billion) in the week until Feb 21, snapping a two-week trend of net selling, data from Japan’s Ministry of Finance showed on Friday (Feb 27).

Some analysts said if Japan follows through on its US$550 billion US investment commitment agreed in 2025, it could significantly impact the cross-currency basis swap market used to hedge US dollar exposure, boosting hedged returns on JGBs for US dollar-based investors.

Foreigners, meanwhile, invested 402 billion yen in Japanese stocks, as they extended their recent buying streak into a ninth successive week.

The Nikkei logged a record 59,332.43 on Thursday, as software shares gained after investor fears over the disruption from artificial intelligence eased.

At the same time, Japanese investors divested approximately 1.9 trillion yen worth of foreign long-term bonds in their largest weekly net sales since Apr 5.

SEE ALSO

Tokyo: Nikkei rises to record high before BOJ decision, JGB yield climb

Japan’s US$550 billion investment in US seen widening gains on hedged JGBs

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However, they bought foreign stocks of a net 408.5 billion yen, the most in the last three weeks. REUTERS