TOKYO (Reuters) - Japanese fund managers trimmed their model portfolios’ exposure to equities and raised their bond holdings in June, a Reuters poll showed, in a month when benchmark U.S. debt yields declined to their lowest levels in seven months.
The survey of five Japan-based fund managers conducted between June 20 and 26 showed respondents on average wanted to allocate 56.9 percent of their model portfolios to bonds in June, from 55.9 percent in May.
The 10-year U.S. Treasury note yield US10YT=RR declined to a seven-month low of 2.10 percent in mid-June as weak domestic data, including indicators of inflation, initially overshadowed an interest rate hike by the Federal Reserve.
Euro zone and U.S. bond yields have risen over the past few days as European central banks were seen to have struck a more hawkish tone.
But the 10-year Treasury yield, at 2.22 percent as of Thursday, was on track to end the month little changed as the markets, relative to the Fed, held a more subdued view of the U.S. economy and whether it was strong enough to withstand another rate hike in 2017.
“The sluggish pace of wage growth, loss of momentum in inflation and ebbing expectations towards the Trump administration delivering large fiscal stimulus measures are suppressing U.S. yields,” said Yuichi Kodama, chief economist at Meiji Yasuda Insurance.
“But U.S. yields could nudge higher towards the summer, when debt purchases by some institutional investors tend to peter out. All in all the U.S. economy is still steady, and the possibility of Fed Chair (Janet) Yellen bringing forward the normalising of the central bank’s balance sheet is increasing.”
The respondents increased their North American bond holdings to 35.5 percent in June from 33.9 percent in May and cut their euro zone bond exposure to 18.8 percent from 21.5 percent.
German, British and French 10-year bond yields fell to multi-month lows in the middle of June but have spiked recently. European Central Bank chief Mario Draghi has spoken about opening the door to tweaks in the bank’s ultra-easy monetary policy, while prospects of the Bank of England increasing rates have also increased.
The respondents upped their Japanese debt holdings to 36.7 percent in June from 36.0 percent in May.
Their overall equity exposure dipped to 37.9 percent in June from 38.1 percent in May.
Reporting by Shinichi Saoshiro; Editing by Gopakumar Warrier