As Japan’s life insurers lay out their annual strategies this month, traders will be looking for the answer to one question — what do some of the world’s biggest investors plan to do about Treasuries?
With the path of Treasury yields set to determine investments across the financial world, the intentions of a large cohort of the biggest foreign holders of U.S. government debt will be a crucial input. Japanese investors were on track to be net sellers of Treasuries for the sixth year in seven in their fiscal year to March, according to U.S. Treasury data through January. Some predict a return to purchases in 2021.
With combined assets equivalent to $3.6 trillion, and one-quarter of this in foreign securities, even minor shifts in Japanese insurer allocations can impact markets. Furious selling by Japanese funds in February helped fuel the biggest monthly decline in Treasuries since 2016, and with benchmark yields close to their highest in a year, bond investors are keen to know at what levels lifers will become more inclined to buy.