Japanese Dump Most Euro Bonds on Record Amid Ukraine Tension

Japanese investors sold a record amount of euro-denominated long and medium-term bonds in March, Ministry of Finance data showed today.

Money managers in Japan made net sales of 1.96 trillion yen ($19.2 billion), capping four months of reductions, the Tokyo-based Ministry of Finance said today. That’s the longest stretch of sales since the 10 months ended December 2011, during the euro region’s sovereign-debt crisis. Last year, Japanese investors bought a net 5.39 trillion yen of such bonds.

Europe’s economies may face headwinds after President Vladimir Putin annexed Crimea in March, setting off the most intense confrontation between Russia and the U.S., along with its European allies, since the Cold War. Tensions simmered after pro-Russian groups hailed a large majority in favor of secession in a referendum they organized yesterday in eastern Ukraine that the government in Kiev dismissed as illegitimate.

“The situation in Ukraine may have played a part,” Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., said in reference to euro debt selling. “It’s possible Japanese money will be forced to go back into some of the higher yielding countries in the region going forward. The global hunt for yield is likely to continue for some time.”

Selling Bunds

Japanese investors sold 1.79 trillion yen of long-term German bunds in March, also the highest reported in data going back to 2005, the MOF report showed. They bought a net 536.3 billion yen of long-term U.S. Treasuries, the most since November, and snapped up 68.7 billion yen of Australian sovereign debt, adding to purchases in January and February.

Investors also sold 481.1 billion yen of Dutch sovereign bonds and 71.6 billion yen of Italian debt.

German 10-year bunds yielded 1.46 percent on May 9, after the rate touched an 11-month low of 1.438 percent. The yield on similar-dated U.S. Treasuries was little changed at 2.63 percent as of 11:55 a.m. in Tokyo. Australia’s 10-year bond yield added 2 basis points, or 0.02 percentage point, to 3.84 percent from the end of last week, when it touched 3.80 percent, the lowest since September.

The yen slid 0.1 percent to 140.28 per euro and lost 0.1 percent to 101.97 per dollar. It has gained 3.2 percent against the shared currency this year, and strengthened 3.3 percent versus the greenback.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Jonathan Annells

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