Japanese Investors Fuel US Bond Selloff, Find Good Debt Opportunities In Europe: Bloomberg

Japanese institutional managers are fueling the bond selloff just as the Federal Reserve pares its $9 trillion balance sheet, writes Bloomberg.
The latest data from BMO Capital Markets show that the largest overseas holder of Treasuries has offloaded almost $60 billion over the past three months.
Bloomberg says that though it may be a small change relative to Japan's $1.3 trillion stockpile, the divestment threatens to grow.
The monetary path between the U.S. and Japan is diverging evermore, the yen is at 20-year lows, and market volatility stateside is breaking out.
"It's a significant amount of selling and on par with what we saw in early 2017 from Japan," said Ben Jeffery, BMO's rates strategist.
While an aggressive Fed tightening cycle to control inflation could result in multiple 50 basis-point hikes in the coming months, the Bank of Japan remains locked in the endless stimulus.
While the selloff pushed the 10-year U.S. yield to 2.94% on Monday in Asia, buyers who pay to protect against fluctuations in the yen-dollar exchange rate see their effective yields dwindle to just 1.3%.
Hedging costs have risen to 1.55 percentage points.
"Hedge costs are the issue for investing in U.S. Treasuries," said Eiichiro Miura, the fixed-income department general manager at Nissay Asset Management Corp.

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Japanese institutional managers are fueling the bond selloff just as the Federal Reserve pares its $9 trillion balance sheet, writes Bloomberg.
The latest data from BMO Capital Markets show that the largest overseas holder of Treasuries has offloaded almost $60 billion over the past three months.
Bloomberg says that though it may be a small change relative to Japan's $1.3 trillion stockpile, the divestment threatens to grow.
The monetary path between the U.S. and Japan is diverging evermore, the yen is at 20-year lows, and market volatility stateside is breaking out.
"It's a significant amount of selling and on par with what we saw in early 2017 from Japan," said Ben Jeffery, BMO's rates strategist.
While an aggressive Fed tightening cycle to control inflation could result in multiple 50 basis-point hikes in the coming months, the Bank of Japan remains locked in the endless stimulus.
While the selloff pushed the 10-year U.S. yield to 2.94% on Monday in Asia, buyers who pay to protect against fluctuations in the yen-dollar exchange rate see their effective yields dwindle to just 1.3%.
Hedging costs have risen to 1.55 percentage points.
"Hedge costs are the issue for investing in U.S. Treasuries," said Eiichiro Miura, the fixed-income department general manager at Nissay Asset Management Corp.