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UPDATE 1-Japan's Meiji Yasuda Life to buy more foreign bonds in H2
October 25, 2017 / 7:44 AM / in a month

UPDATE 1-Japan's Meiji Yasuda Life to buy more foreign bonds in H2

* Kept foreign bond holdings steady in H1, to buy more in H2

* To keep yen bond holdings steady in H2 after decreasing in H1

* To actively buy unhedged bonds during times of yen appreciation (Adds context, details)

By Shinichi Saoshiro and Yoshiyuki Osada

TOKYO, Oct 25 (Reuters) - Japan’s Meiji Yasuda Life Insurance plans to increase its foreign bond holdings in the second half of the financial year ending March 2018 after keeping them steady in the first half, a senior company executive said on Wednesday.

The country’s third-largest private life insurer, which has assets of around 37 trillion yen ($324.96 billion), said it also aims to keep its yen bond holdings steady in the second half.

Japanese institutional investors have increasingly sought better returns abroad, as they face low domestic yields, which have been driven down by the central bank’s extensive monetary easing.

“We look to mainly increase our unhedged bond holdings during times of yen appreciation,” said Toshihiko Yamashita, chief executive of Meiji Yasuda Life’s investment division.

Dollar-denominated assets remained at the core of the company’s foreign bond holdings, which make up about 17 percent of its portfolio, Yamashita said.

The insurer bought an array of foreign currency debt instruments in the first half including environmental, social and governance (ESG) bonds and U.S. residential mortgage-backed securities.

But its foreign bond holdings were kept steady in the first half in net terms due to maturing debt, Yamashita said, adding that the ratio of hedged to unhedged foreign bonds the insurer held in the first half was “roughly fifty-fifty.”

The insurer said it has a war chest of around 2 trillion yen to spend on investments for the current financial year through March 2018.

“Of the 2 trillion yen, we have set aside 40 percent for flexible investments to be used on unhedged and hedged foreign bonds as well as yen bonds,” Yamashita said.

Yen bonds make up 46 percent of Meiji Yasuda’s portfolio and remains their mainstay investments, but the insurer said its yen bond holdings decreased by 50 billion yen in the first half. It plans to keep its yen holdings steady in the second half.

“There is no change to the very low yield environment surrounding yen bonds and we will approach them with caution. But are still ready to buy them if their yields rise and make them more attractive relative to foreign bonds,” Yamashita said.

Meiji Yasuda expects the dollar, now slightly below 114 yen , to be at 115 yen at the end of the financial year.

It sees the 10-year U.S. Treasury yield, now roughly around 2.4 percent, to be at 2.5 percent next March.

$1 = 113.8700 yen Reporting by Shinichi Saoshiro; Editing by Kim Coghill and Biju Dwarakanath

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