Reuters: US Dollar Report: UPDATE 1-Dai-ichi Life warms up to foreign bond investment

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UPDATE 1-Dai-ichi Life warms up to foreign bond investment Oct 23rd 2012, 10:41 Tue Oct 23, 2012 6:41am EDT * Dai-ichi increased foreign bonds without currency hedging * Plans to keep foreign bonds steady in Oct-March but flexible * Yen bond holdings will continue to rise * Sees yen moving around Y80 per dollar By Hideyuki Sano and Naoyuki Katayama TOKYO, Oct 23 (Reuters) - Japan's Dai-ichi Life Insurance Co Ltd increased its holdings of foreign bonds in the half year to September without hedging against currency movements, a senior official said on Tuesday, encouraged by measures taken by Europe to tackle its debt problems. For the next six months to March, Japan's second largest insurer, however, plans to increase its yen bond holdings and extend their duration, in line with a long-held policy to reduce a mismatch between the tenures of its long-term liabilities and assets. "For now, we plan to keep foreign bonds steady in the second half. But we want to be flexible and could buy more or sell down while watching markets," Takashi Iida, manager of Dai-ichi Life's investment planning department, told reporters. The insurer has total assets of around 30 trillion yen ($375 billion), and as of March it held about 4.2 trillion yen of foreign bonds while selling about 2.7 trillion yen of foreign currencies through forward contracts, leaving about 1.5 trillion yen worth unhedged. Iida said the company has been trying to diversify its foreign bonds -- out of the dollar and the euro to commodity currencies such as the Australian and Canadian dollars. While increasing unhedged foreign bonds, Dai-ichi cut the holding of currency-hedged foreign bonds because returns on them became so low after deducting hedging costs, Iida said. At the height of the European debt crisis in July, German Bunds yield hit a record low of 1.126 percent, shrinking the yield gap between Japanese bonds to lows not seen in many decades. Which is one reason the company still plans to increase yen bond holding in the second half, after an increase in the first half. In the short term, fiscal problems in Europe and the United States remain a risk, Iida said. "In the medium-term, however, there are excessive liquidity as a result of global easing. It has so far flocked to government bonds, but they could go to commodities and resources, boosting prices and hurting consumption. That is a risk we need to care," Iida said. Link this Share this Digg this Email Reprints

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