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Foreigners Bailing on BOJ Bets Narrow Spread on Yen Swap Rates

  • JSCC/LCH 20-year swap spread is the tightest since December
  • Foreign investors expected to cover their positions: Barclays
Images Of Japanese One Yen Coins Ahead Of Sales Tax Rise
Photographer: Kiyoshi Ota/Bloomberg

The spread between the yen’s foreign and domestic swap rates is shrinking as Bank of Japan Governor Haruhiko Kuroda’s repeated commitment to the ultra-loose policy prompts overseas investors to turn back to the nation’s government bonds.

The spread between 20-year yen swap rates quoted on Japan Securities Clearing Corp. and London’s LCH Clearnet is down to 7.25 basis points, the narrowest since December. It swelled to a record 15.5 on Jan. 10, a day after the BOJ’s move to trim purchases of some bonds spurred speculation it was looking to taper stimulus.