Japan’s insurance companies to purchase more super-long bonds, as yields hit multiyear highs. By Stocksak

© Stocksak. The Tokyo headquarters of Nippon Life Insurance Co. displays the logo. February 26, 2019. REUTERS/Hideyuki Sano/Files

By Kevin Buckland & Tomo Uetake

TOKYO (Stocksak – Japanese life insurance companies plan to purchase more super-long government bonds. Attracted by the highest yields since 2014, they are tempted by the highest yields.

Sumitomo Life and Japan Post Insurance are just a few of the insurance companies that have provided details about their investment plans for the remainder of the fiscal year ending April at briefings in the past days.

Common thread has been an intention of increasing holdings of longest-maturity JGBs. The 30-year securities are the most attractive because they offer “attractive yields” and are safe from a long list global market uncertainties.

Many insurance companies also plan to shift money from currency-hedged foreign bonds into yen bonds with rising hedging costs.

“Japanese government bonds are now attractive,” while “hedged foreign bonds are losing their appeal,” a representative of Japan Post Insurance told a briefing. “We have already begun to shift from hedged foreign bonds to JGBs and will continue to do so.”

The yields on 30-year JGBs rose to 1.685% on Thursday, the highest since September 2014. While the 20-year yield climbed to 1.315% in February 2015, it was the highest since February 2015. Both fell as investors snatched up the discounted debt.

Due to a fall in U.S. yields, Yields fell further on Wednesday as the Bank of Japan bought more bonds ahead of Thursday’s two-day policy-setting meeting.

Last year, the 30-year bond yielded 1.54% and the 20-year yielded 1.18%.

Sumitomo representatives stated that if the amount is above 1.5%, we will consider additional investment in 30-year JGBs.

Nippon Life encourages caution.

“It’s true, it’s the most easy environment to invest over the past several years,” a Nissay representative said Monday. “Because yields have been at 1.5%, it’s not clear if we can buy actively now, but we’re still far from that point.”

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