Hokuhoku Financial Group, whose shares are the best performers among Japanese banks this year, is hunting for yields from short-dated government bonds as it prepares for rising interest rates at home.
The president of the major regional lender, Hiroshi Nakazawa, said he expects the Bank of Japan to raise interest rates in October or December if "things go smoothly.” That view is in line with a growing number of analyst predictions and traders wagering on rate hike odds.
"For the time being, we have to structure a portfolio that will be less affected by the BOJ’s decisions,” said Nakazawa, whose firm’s shares have shot up 95% this year, the biggest gain among the almost 70 lenders in the Topix banks index. Banks need to keep some government bonds on their books partly as collateral for market deals, and shorter-dated ones tend to be less vulnerable to yield increases.
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