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Japanese Investors So Desperate for Yield They’ll Buy U.S. Munis

  • Negative rates send fixed-income investors looking overseas
  • Foreign holdings of U.S. state and local bonds on the rise
Japan Stocks Drop For Fourth Day As China Halts Equity Trading
Photographer: Tomohiro Ohsumi/Bloomberg
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Tetsuo Ishihara, a strategist for Mizuho Securities in New York, started fielding phone calls a couple months ago from Japanese clients interested in U.S. municipal bonds, which usually have little allure overseas because federal tax breaks depress the yields.

But with negative interest rates on Japanese bonds due in as many as 10 years and near record-low payouts on Treasuries, he discovered that state and local debt demanded attention. Even highly rated municipals are delivering bigger returns than U.S. government bonds, without the risk that comes with corporate securities.