October 12, 2017 / 9:23 AM / 8 months ago

INTERVIEW-Fukoku Life plans to stick to 'open foreign bonds' in H2

* Plans to invest mainly in open foreign bonds

* Has invested in Australian and Canadian dollar-denominated bonds

* Will continue to pursue high-yielding products

By Ayai Tomisawa and Daiki Iga

TOKYO, Oct 12 (Reuters) - Fukoku Mutual Life Insurance plans to invest 20 billion yen ($178.16 million) in open foreign bonds, or foreign bonds without currency hedging, in the second half as hedging costs remain high, a senior company executive said on Thursday.

The insurer, which had 6.59 trillion yen in total assets as of June, invested a net 60 billion yen in foreign government and corporate bonds in the first half ended September.

The insurer spent 130 billion yen buying open foreign bonds, while it reduced such bonds by 70 billion yen.

“We will continue investing in open foreign bonds, particularly in products with spreads and liquidity while diversifying our assets over a range of currencies,” Takehiko Watabe, general manager of investment planning, told Reuters.

The insurer invested 45 billion yen in Australian dollar-denominated bonds and 28 billion yen in Canadian dollar-denominated bonds in the first half.

Fukoku said in April that it would spend 500 billion yen to create a new fund this fiscal year that would invest in high-yielding, riskier products over the next five years.

“If we continue to invest about 4-5 billion yen in about 10 products every half-year period, our 500 billion yen goal in five years seems to be within reach,” Watabe said.

In the first half, it invested 50 billion yen in high-yielding products.

“The current dollar-yen level is not that cheap, but we have made currency gains since then. Even if the yen strengthens from the current level a bit, it’s not a problem for us,” Watabe said. “We’d rather not pay high hedging costs so we will stick to open foreign bonds.”

The insurer will also reduce holdings of Japanese government and corporate bonds by 30 billion yen this fiscal year, having cut 10 billion yen of such bonds in the first half.

Fukoku’s domestic stock holdings expanded by 10 billion yen in the first half through a reshuffling of its portfolio, but it plans to cut holdings by 10 billion yen in the second half.

“We had bought stocks in advance, so the current strong market is serving as a tailwind to us,” Watabe said.

On Thursday, the Nikkei scaled its loftiest peak in more than two decades, partly helped by records on Wall Street.

Fukoku expects the Nikkei to trade between 18,000 and 22,500 this fiscal year.

It expects the U.S. benchmark 10-year Treasury yield to move between 2.3 percent and 2.9 percent, and the 10-year JGB yield to trade between minus 0.10 percent and 0.15 percent.

$1 = 112.2600 yen Editing by Biju Dwarakanath

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