(Bloomberg) -- Lock in some profits. That's one way Japanese investors seem to be playing the global bond rally that's seen yields across Europe sink to record levels and those on U.S. Treasuries touch multi-year lows.
Funds from the Asian nation sold 911.9 billion yen ($8.58 billion) of overseas debt last week, the most since early April, data from the Ministry of Finance showed Thursday.
“Investors probably have taken profits as global bond prices have been rising steadily,” said Tsuyoshi Ueno, senior economist at NLI Research Institute in Tokyo. “Banks may have moved to realized their profits, but the underlying trend for Japanese investors to invest abroad hasn't changed.”
The wave of profit-taking comes after Japanese investors piled money into overseas debt in recent months. They poured money into Spanish bonds for 21 months out of the past two years, and as recently as June bought a record amount of Italian and Belgian securities, while also adding $21.9 billion in U.S. debt.
The selling of overseas bonds may also have helped boost the yen. Japan's currency appreciated 0.9% against the dollar last week as local funds turned net sellers of foreign debt for the first time in a month. The yen touched 104.46 on Monday, the strongest in almost three years. It's up more than 2% against the euro this month.
While Japanese continue to keep large holdings of foreign bonds, they are being forced to become more innovative and nimble to make returns as yields worldwide keep tumbling.
Funds are having to direct money “into structured bonds, high-yield notes and foreign credit to seek returns,” NLI's Ueno said.
To contact the reporters on this story: Stephen Spratt in Hong Kong at sspratt3@bloomberg.net;Chikafumi Hodo in Tokyo at chodo@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Shikhar Balwani, Nicholas Reynolds
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