Japan investors snap up U.S. bonds, expecting end of rate hikes (2024)

FAQs

Japan investors snap up U.S. bonds, expecting end of rate hikes? ›

TOKYO -- Japanese investors are pouring money into U.S. bonds, spurred by speculation that the Federal Reserve's interest hikes are about to run their course.

Each month, the BoJ targets monthly government bond purchases of around six trillion yen ($38 billion) to pump liquidity into the system and keep borrowing costs down.

U.S. Treasury Bonds

In fact, Japan is by far the largest foreign owner of U.S. treasury securities, with Japanese banks, pension funds, insurance companies etc. holding a total of $1.138 trillion at the end of 2023.

In April 2024, the yield on a 10-year U.S. Treasury note was 4.54 percent, forecasted to decrease to reach 3.39 percent by January 2025.

As of the latest update on 17 Jun 2024 14:15 GMT+0, the Japan 10 Years / United States 10 Years Government Bond spread value is -334.9 basis points (bp), where 1 basis point equals 0.01%. This means that the yield of Japan 10 Years Government Bond is -3.349% lower than United States 10 Years Government Bond.

TOKYO -- Norinchukin Bank will sell more than 10 trillion yen ($63 billion) of its holdings of U.S. and European government bonds during the year ending March 2025 as it aims to stem its losses from bets on low-yield foreign bonds, a main cause of its deteriorating balance sheet, and lower the risks associated with ...

China invests heavily in U.S. Treasury bonds to keep its export prices lower. China focuses on export-led growth to help generate jobs. To keep its export prices low, China must keep the renminbi low compared to the U.S. dollar.

China downsizes holdings of US treasury bonds to $775 billion: data - Global Times. China's holdings of US Treasury bonds fell to $775 billion in February, a drop of $22.7 billion from a month earlier, the second decrease this year, according to data released by the US Department of the Treasury on Wednesday.

The three largest holders of Treasuries -- Japan, China and the UK -- led the purchase U.S. government debt. Japanese investors raised their stash of Treasuries to $1.138 trillion in December, from $1.127 trillion in November, data showed. Their holdings were the largest since August 2022.

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

Should you sell bonds when interest rates rise? ›

Unless you are set on holding your bonds until maturity despite the upcoming availability of more lucrative options, a looming interest rate hike should be a clear sell signal.

If you're saving for a goal less than a year away: If you're saving money for a goal with a short-time horizon, T-bills can make more sense than CDs. They provide a higher APY than savings accounts, and they're more liquid than CDs.

To execute quantitative easing, central banks buy government bonds and other securities, injecting bank reserves into the economy. Increasing the supply of money provides liquidity to the banking system and lowers interest rates further. This allows banks to lend with easier terms.

They provide a predictable income stream. Typically, bonds pay interest on a regular schedule, such as every six months. If the bonds are held to maturity, bondholders get back the entire principal, so bonds are a way to preserve capital while investing. Bonds can help offset exposure to more volatile stock holdings.

When Fed policymakers decide they want to lower interest rates, the Fed buys government bonds. This purchase increases the price of bonds and lowers the interest rate on these bonds. (We can think of this as the Fed increasing the money supply, which makes money more plentiful and drives down the price of borrowing.)

After 20 years, the issuer of the bond pays you $10,000. For this reason, zero coupon bonds are often purchased to meet a future expense such as college costs or an anticipated expenditure in retirement. Federal agencies, municipalities, financial institutions and corporations issue zero coupon bonds.