MUFG wades back into Japanese bonds with eye on policy risks
Yamashita said the bank started “exploratory purchases” of 10-year JGBs at around 3.1%
Mitsubishi UFJ Financial Group (MUFG) is tentatively re-entering Japan's government bond market, despite concerns over potential yield spikes caused by fiscal and monetary policies. Atsushi Yamashita, CEO of MUFG's global markets business, stated that the bank plans to gradually rebuild its position in 10-year Japanese government bonds (JGBs), while closely monitoring interest rates.
Yamashita anticipates that yields will peak around 3.2%, just above the three-decade high of 3.115% reached earlier this month. However, he remains cautious about the prospect of further yield increases if the Bank of Japan struggles to control inflation or Prime Minister Sanae Takaichi fails to reassure investors about her ability to manage government finances.
MUFG's banking and trust bank units have a combined portfolio of over 85 trillion yen (US$537 billion) as of June. The bank has been reducing its exposure to longer-term Japanese government bonds in recent years, with the average duration of its JGB holdings falling to 1.2 years as of June, from 3.1 years in September 2021. Yamashita highlighted the importance of maintaining market confidence through responsible fiscal policy, especially given Japan's high debt-to-GDP ratio.
He noted that the Bank of Japan is likely to raise rates in December, followed by additional hikes every three months, with the terminal rate potentially reaching around 2% from the current 1.25%. While MUFG is gradually accumulating its yen bond holdings, Yamashita ruled out the repatriation of assets, suggesting that there may be opportunities for increased foreign-bond investments if yields become more attractive.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
