Halister News

(Bloomberg) -- It is misleading to think Japanese investors are buying more Treasuries even as data from Japan’s Ministry of Finance show increased purchases of U.S. sovereign bonds. A cross-reference check with U.S. TIC data reveals quite the opposite.

• Net buying of U.S. sovereign bonds that include govt, govt agency and local govt debt rose to 1.52t yen ($15.1b) on a 10-month moving average basis in June, near a record high, according to Japan’s MOF data
  • Click here for chart
• While MOF data don’t break down the purchases, U.S. Treasury’s June TIC report on Aug. 15 reveals that the Japanese are in fact buying U.S. govt agency bond
  • Latest TIC report shows Japanese investors’ net purchases of such securities have been on the rise since 2013, reaching $6.1b in June on a 10-month moving average basis
  • Japanese investors have been net sellers of Treasuries since Jan. 2015 on the same basis
• Japan’s biggest life insurers, including Nippon Life and Dai-ichi Life, have said they prefer U.S. mortgage debt to Treasuries on rising hedging costs
• Mortgage-backed securities issued by Government National Mortgage Association offer a spread of 89 bps vs govt bonds, according to BofAML index
• Treasuries are no longer an option for yen investors who need to hedge the Japanese currency’s move, says Kazuya Sugiura, CEO of PineBridge Investments Japan
  • Ginnie Mae bonds are among the top choices for these investors as the securities are guaranteed by the U.S. govt and are thus the closest alternative to Treasuries
• NOTE: Agencies bonds include those from U.S. govt agencies and corporations, as well as federally-sponsored enterprises, such as the Federal National Mortgage Association