Halister News

(Bloomberg) -- Dai-ichi Life Insurance, Japan’s second-biggest life insurer, has bought Spanish and Italian bonds and added U.S. mortgage and corporate debt in quarter through June to seek better returns abroad and diversify risks.

• “We have to shift to the peripheral nations as government bonds in Europe’s core nations don’t offer much yield,” Kazuyuki Shigemoto, general manager of the global fixed- income investment department, said in interview on July 21.
  • “However, yields in Spain and Italy have gone down quite a lot and it raises questions whether their returns are worth risks involved.”
• Spain’s 10-year yield has dropped 52 bps since June 24 when U.K. released its referendum result, to 1.11% on July 22; Italy’s rate has fallen 32 bps to 1.23% on July 22; German equivalent rate stood at -0.030% July 22 vs -0.047% June 24
• In the U.S., Dai-ichi has purchased mortgage debt such as Ginnie Mae as well as Freddie Mac, Fanny Mae and corporate notes that offer a spread over Treasuries
  • Dai-ichi has assets of about JPY35t yen ($329b)
• Dai-ichi Life bought overseas bonds mostly with currency hedge since April, although it purchased partially unhedged bonds towards end-June when JPY strengthened to near 100 per USD
• “Unfortunately, Treasury yields are at a level where we can’t buy when considering the hedging costs and their returns,” Shigemoto said. “Given current foreign-exchange fluctuations and outlook, we need to hedge the positions.”
  • Expect USD/JPY to trade between 100-110 over the next few months, making it “difficult” to buy fixed-income securities without the hedge, Shigemoto said