(Corrects time period in first paragraph)
TOKYO Aug 20 Foreigners' net purchases of
Japanese government bonds in July were the biggest in over two
years, industry data released on Wednesday showed, against a
backdrop of falling global yields and rising risk aversion.
Data from the Japan Securities Dealers Association showed
that foreign net purchases of JGBs, excluding treasury bills,
totalled 1.28 trillion yen, the largest amount since June 2012.
"Foreign buyers were net sellers of JGBs the previous month,
and they had to allocate their funds somewhere," said Naomi
Muguruma, senior market economist at Mitsubishi UFJ Morgan
Stanley Securities in Tokyo.
"Some of that money came back in July, as global tensions
rose," she said.
Conflicts in the Middle East flared last month, in addition
to rising fears about the economic impact of international
sanctions on Russia for its support of pro-Moscow insurgents in
Ukraine. These factors all prompted investors to seek safety in
fixed-income assets, pushing down global yields.
Moreover, the European Central Bank cut all its interest
rates in June and promised long-term cheap loans to banks from
September. Investors are increasingly betting the ECB will
eventually take quantitative easing steps.
Money market traders now see an even 50 percent chance of an
ECB asset-purchase programme in the coming year, a Reuters poll
found on Monday. A previous survey showed only a one-in-three
Yields on German 10-year Bunds - the benchmark for euro zone
borrowing costs - plumbed record lows last month, and hit a
fresh nadir of 0.952 percent last week.
The benchmark 10-year JGB was at 0.510 percent
on Wednesday, up 1.5 basis points on the day, and not far from a
16-month low of 0.495 percent touched several times this month.
Under its own quantitative easing scheme, the Bank of Japan
buys the equivalent of 70 percent of new JGB issuance every
month in its bid to stoke inflation and spark a sustainable
(Reporting by Lisa Twaronite; Editing by Simon Cameron-Moore)