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PC party leader attends the protest in support of fishermen | SaltWire #newsupdate #newfoundlandAMSTERDAM - Japanese investors are finally being paid to park their cash back home, a move that might be expected to spook euro zone markets where they're a big force but could ironically prop up demand instead as ECB rate cuts loom.
"People are concerned about what damage there might be to global bonds from Japanese investors. A lot of that's already occurred," said Andre Severino, head of global fixed income at Japan's Nikko Asset Management, which manages $228 billion.In 2022, hedging costs for Japanese investors buying foreign bonds surged as the BOJ held rates below 0% while others hiked, meaning it became much more expensive to buy overseas bonds on a hedged basis.
The ECB's key rate is 4%, versus 0-0.1% in Japan. Markets see the ECB cutting rates to around 3% by year-end, and the BOJ hiking to 0.25%. Overall, Nikko's Severino said he expects stable to positive Japanese flows into foreign bonds, including the euro zone, going forward.Following 2022's exodus, flows in and out of euro zone government bonds last year were marginal, Nordea data shows, while Japanese investors bought 122 billion euros worth of U.S. Treasuries even as rates differentials widened -- suggesting many purchases were unhedged.
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