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17 Apr 2013
Forex Flash: Japanese life insurers set to release fiscal year outlooks - BBH
FXstreet.com (Barcelona) - Brown brothers Harriman analysts note that Daido Life, one of the smaller of the Big 9 life insurance firms in Japan that dominate the industry, released its outlook for the fiscal year.
They add that others will do so over the next week or two. According to press reports, they note that Daido Life said that it will slow the pace of its JGB purchases, which appears at least partly forced upon it by the BOJ intent to buy 70% of the new supply. It expects the 10- yield to trade in a range of 0.3%-0.7%. They feel that it implies that when yields approach the upper end of the range, it will likely be a better buyer of JGBs. Currently the yield is just below 0.6% and when the yield is at the lower end of the range, it will likely be a better buyer of foreign bonds. Further, they add that it indicated that it will buy more foreign bonds this year than last, but did not say how much more. They write, “In the last fiscal year it bought JPY120 bln. In most of the discussions of Japanese purchasing of foreign bonds, little attention is paid to the fact that the currency exposure is often hedged. Daido Life said that it would keep it currency hedge ratio steady near 70%.” They explain that means that the demand for foreign bonds is not the same as demand for the foreign currency and it expects the dollar to trade between JPY90 and JPY120 this year and the euro to trade between JPY105-JPY145. They finish by noting that currently, the dollar is near JPY98 and the euro is near JPY128.80.
They add that others will do so over the next week or two. According to press reports, they note that Daido Life said that it will slow the pace of its JGB purchases, which appears at least partly forced upon it by the BOJ intent to buy 70% of the new supply. It expects the 10- yield to trade in a range of 0.3%-0.7%. They feel that it implies that when yields approach the upper end of the range, it will likely be a better buyer of JGBs. Currently the yield is just below 0.6% and when the yield is at the lower end of the range, it will likely be a better buyer of foreign bonds. Further, they add that it indicated that it will buy more foreign bonds this year than last, but did not say how much more. They write, “In the last fiscal year it bought JPY120 bln. In most of the discussions of Japanese purchasing of foreign bonds, little attention is paid to the fact that the currency exposure is often hedged. Daido Life said that it would keep it currency hedge ratio steady near 70%.” They explain that means that the demand for foreign bonds is not the same as demand for the foreign currency and it expects the dollar to trade between JPY90 and JPY120 this year and the euro to trade between JPY105-JPY145. They finish by noting that currently, the dollar is near JPY98 and the euro is near JPY128.80.