Japanese investors sold US and German bonds, bought French debt

Japanese investors sold US bonds in June amid expectations of steady interest rate hikes in the United States, while offloading low-yielding German debt, government data showed on Wednesday. The investors sold a net 455.8 billion yen ($4.09 billion) of US bonds in June, after selling a net 2.071 trillion yen in May.
They sold a net 77.7 billion yen of German bonds in June, after dropping a net 712 billion yen the month before. "The June data shows that US bonds are not an easy buy for Japanese investors at a time when the Federal Reserve is hiking interest rates. As for German bonds, their yields are too low," said Teruyoshi Sotome, senior financial analyst at Mizuho Securities. The market value of a bond tends to decrease when interest rates rise.
The Ministry of Finance data on Wednesday showed Japanese investors bought a net 563.6 billion yen of French debt in June, after selling a net 157.1 billion in May. They also purchased a net 58.2 billion yen of British bonds in June. "Within the European bond sphere, German bond yields are too low, while peripheral debt like Italian bonds offer higher yields but come with political risks. Therefore investors are opting for 'semi-core' bonds like French debt," Sotome said.
The German 10-year bund yield moved between 0.30 and 0.52 percent in June, while its French counterpart ranged between 0.66 to 0.92 percent over the same period. Japanese investors sold a net 109.6 billion yen of Italian bonds in June, after selling 85.4 billion yen in May. They bought a net total of 578.4 billion yen in foreign bonds in June, after selling a net 1.454 trillion yen in May.