Japanese insurance companies dump ultra-long government bonds as yields soar in May

Source: Global Market Report

As yields rose to their highest levels in decades, Japanese insurance institutions sold off domestic super-long-term government bonds in May, reversing the buying trend seen at the beginning of the fiscal year.

According to data from the Japan Securities Dealers Association, domestic insurance companies had a net sale of 201.2 billion yen (approximately $1.25 billion) in Japanese government bonds with maturities over 10 years during the month. In contrast, they had a net purchase of 327.2 billion yen in the first month of the fiscal year, April.

Although Japanese government bond yields reached multi-year highs in May, concerns that the Bank of Japan may not be able to tighten policy quickly to curb inflation have eroded the appeal of bonds. At the same time, Prime Minister Sanae Takaichi’s expansionary fiscal policies and her preference for loose monetary policy have added to market apprehensions.

Miki Den, Senior Interest Rate Strategist at SMBC Nikko Securities, stated: "In May, yields rose sharply and volatility was high, which may have led investors to take a wait-and-see approach. April’s performance was rather special, as it was the start of the fiscal year, so investors had more budget flexibility."