Japanese Buying Treasuries On USD Dips

From the FXWW Chatroom: The latest weekly MoF flow data suggest a “new” trend among Japanese institutional investors: they are buying the current dip. They have long been good buyers of foreign bonds, egged on by relative JPY weakness and the promise of more. Things changed this year however with USD/JPY plunging briefly below 110 from above 123 in December. Nervousness persists but some institutional investors have opted to buy into the fall, as reflected by data showing Japanese buying a net Y1.455 tln foreign bonds in the week to February 6. The USD/JPY push down to 110.99 thereafter did produce net sales of Y1.315 tln in the following week but the bounce to 114.87 on February 16 resulted in net foreign bond purchases of Y1.9743 tln in the week to February 20. US Treasuries are the main focus in light of NIRP in Japan and Europe, with capital gains being made on UST holdings and any USD blip up a bonus. EUR and GBP bond holdings are either being pared or hedged aggressively while any purchases of AUD and NZD assets are likely being currencyhedged.

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