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Japan's Daido Life Insurance plans to increase its holdings of stocks and foreign corporate bonds in the second half of its financial year to March, a senior company executive said on Wednesday. Within foreign bonds, Daido plans to step up holdings of mainly currency-hedged investment-grade corporate bonds, Yoshihiro Okita, executive officer of investment planning, told Reuters.
The company also plans to shift further to European bonds from US Treasuries but it is not looking to add to foreign government bonds overall, Okita said. "We'll increase foreign bonds but will generally go for corporate bonds," Okita said, adding that Daido's view on exposure to US Treasuries is mainly a result of high dollar-hedging costs.
In contrast, the company plans to make investments in European bonds without a currency hedge, expecting the euro to strengthen against the yen during this financial year because interest rate increases in the euro zone have not yet been fully priced in. Okita said that new purchases of bonds of European countries are likely to be in countries with relatively low political risk, such as Germany and France.
The company expects yields on US 10-year Treasury notes to be at 3 percent by the end of next March, hovering between 2.7 percent and 3.3 percent. "While they may get close to 3.3 percent, we don't expect interest rates to increase so strongly," Okita said. Daido also plans to step up its holdings of foreign stocks, mainly in the United States, as well as domestic equities.

Copyright Reuters, 2018

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