Japanese investors sold U.S. sovereign bonds for a second straight month in November as rising hedging costs and an increase in short-term U.S. yields hurt appetite. They also dumped U.K. securities, while continuing to buy German and French debt.
Funds based in the Asian nation sold a net 1.2 trillion yen ($10.8 billion) of U.S. bonds during the month, after offloading 2.1 trillion yen in October, data from Japan’s Ministry of Finance showed Friday. That’s the first monthly-back-to-back withdrawal since a four-month selling streak between November 2016 and February 2017.
"Purchases of U.S. bonds fell mainly due to rising currency-hedging costs,” said Tsuyoshi Ueno, Tokyo-based senior economist at NLI Research Institute. “The trend is likely to continue.”
Uncertainty about the U.S. tax bill and concerns over a bipartisan probe of Russian meddling in the U.S. election kept investors cautious in November.
The U.S. curve flattened as the two-year and three-year yield each climbed more than 16 basis points during the month, while the 10-year yield rose just three basis points.
Japanese investors look set to be net sellers of U.S. bonds for the first time in four years, having now sold 3.36 trillion yen in the first 11 months of 2017.
They offloaded a net 68.8 billion yen of U.K. debt in November, marking a third consecutive month of selling. "Concerns over Brexit and the political uncertainty could be making investors less enthusiastic about buying," NLI’s Ueno said.
Japanese funds were net buyers of German debt for a second straight month, taking in 110.6 billion yen, after purchasing 105 billion yen in October. They lapped up a net 20.8 billion yen of French sovereign bonds, after investing 28.5 billion yen in the previous month.
Closer to home, net purchases of Philippine bonds -- including those issued by the government -- were 69.9 billion yen, the most for any month since a record 101.9 billion yen in March 2010.
The data from the ministry includes securities issued by governments, government agencies and local authorities, and those with the original maturities of more than one year.
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