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Japan Investors Cut Aussie Dollar Bonds Most Since 2005

Japanese portfolio investors cut holdings of Australian-dollar debt by the most in at least eight years on speculation the South Pacific currency is poised to decline.

Investors offloaded 439.4 billion yen ($4.6 billion) more of bonds and notes denominated in the so-called Aussie dollar than they bought in January, the Tokyo-based Ministry of Finance said today, the biggest reduction in data going back to 2005. Japanese holdings were lowered for a third month, the longest stretch since the six months ended July 2007.

“We sold a few months ago,” said Hiromasa Nakamura, a senior investor at Mizuho Asset Management Co. in Tokyo, which oversees the equivalent of $34.5 billion and is a unit of Japan’s third-largest bank. “The Australian dollar may decline,” said Nakamura, who sees the currency at 95 U.S. cents by year-end.

Japanese investors held 13.98 trillion yen of debt denominated in Australian dollars as of the end of 2011, based on the latest figures available from the Bank of Japan. At the time, the figure was equivalent to A$178.1 billion ($182.4 billion). The size of Australia’s sovereign bond market was A$210.3 billion, according to data compiled by Bloomberg. As of March 8, The South Pacific nation had a total of A$267.2 billion in securities outstanding, according to government figures.

The Australian dollar fell 0.2 percent to $1.0244 as of 3:37 p.m. in Sydney. It has declined 1.5 percent this year after climbing 1.8 percent in 2012. It touched a 4 1/2-year high of 97.75 yen today.

Bond Losses

Australia’s government bonds handed investors a 0.4 percent loss this quarter, according to Bank of America Merrill Lynch index figures. The securities, which hold the highest credit score and a “stable” outlook from all three of the biggest ratings companies, fell 0.5 percent in January, the fourth month of declines. That’s the longest stretch since the period ended December 2010, the data show. They rebounded 0.7 percent in February.

The South Pacific nation’s benchmark 10-year debt fell today, pushing the yield up to 3.56 percent, the highest since Feb. 21. The rate has advanced 28 basis points, or 0.28 percentage point, this year. It touched an all-time low of 2.698 percent on June 4, 2012.

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