City banks logged net selling of government and corporate bonds for the second straight month in May, the Japan Securities Dealers Association said Thursday.
The banks posted net sales of ¥1.01 trillion for the month, down from net sales of ¥2.8 trillion in April, it said.
As a key 10-year JGB yield rose sharply to hit 1.000 percent at one point May 23, banks moved to reduce interest rate risks by cutting bond holdings, an official at a bank-affiliated securities house said.
They apparently restrained from investing in JGBs to increase lending and channel more funds to other financial vehicles after the Bank of Japan adopted bold monetary easing in April.
Regional and second-tier regional banks turned net sellers of public and corporate bonds, excluding short-term government securities. Regionals logged a selling excess of ¥26.3 billion, while the figure was ¥15.2 billion for second-tier regionals.
While they posted net selling of long-term and superlong-term JGBs, they were net buyers of medium-term government notes, apparently to reduce interest rate risks.
Foreign investors, including overseas financial institutions, booked net selling of ¥454.6 billion, becoming net sellers for the first time in two months.
By contrast, insurers were net buyers for the 12th straight month, with a buying excess of ¥820.2 billion. Their net buying of superlong-term JGBs stood at ¥655.3 billion, up sharply from ¥57.4 billion in the previous month.
The amount of their net buying has returned to a usual level as yields have come to more acceptable levels than those immediately after the BOJ’s announcement of its new policy regime, the securities house official said.
The data also showed that trust banks were net buyers for the seventh consecutive month, with a buying excess of ¥1.3 trillion.