October 23, 2018 / 10:03 AM / 2 months ago

INTERVIEW-Asahi Life raises non-U.S. bond holdings by 170 bln yen

* Asahi has bought French, Australian, New Zealand and Polish bonds

* Asahi plans to cut holdings of U.S. bonds with currency hedging and buy ‘open’ U.S. bonds

* Asahi to extend its JGB holding’s duration by half year

By Ayai Tomisawa and Shinji Kitamura

TOKYO, Oct 23 (Reuters) - Japan’s Asahi Mutual Life Insurance Co raised its foreign bonds investment to 170 billion yen from initially planned 100 billion yen for this fiscal year amid a low-yield domestic environment, a senior company executive said on Tuesday. “We expected that equities would be strong at the beginning of this year, but the stock market fell and there was a possibility that it would not recover. So we ended up raising our holdings of foreign debt,” Masaru Tsuruoka, head of the asset allocation and planning department at Asahi Life, told Reuters in an interview. The insurer has invested 170 billion yen in mostly French, Australian, New Zealand and Polish bonds, with currency hedging, according to Masaru Tsuruoka, head of the asset allocation and planning department at Asahi Life.

“We have bought bonds of countries which have not tightened their monetary policy yet.”

Tsuroka said that during the first half of the fiscal year Asahi switched 100 billion yen of hedged U.S. dollar-denominated bonds to unhedged.

And in the second half of the year, it intends to continue reducing its holdings of hedged U.S. bonds by 65 billion yen, and instead increase holdings of open, or unhedged, U.S. bonds by the same amount.

As a result, Asahi will be less exposed to rising currency hedging costs, as the share of foreign bond holdings accounted for by currency-hedged bonds would be brought down to 75 percent from 90 percent in April.

“We are looking to buy open U.S. bonds in a strong yen situation where the dollar level does not go below 108 yen. But if the dollar-yen weakens further to 105 yen, we will become risk averse,” Tsuruoka said.

The insurer, which had a total assets of about 5.4 trillion yen as of March, cut investment in domestic bonds by 10 billion yen in the first half.

In its bond holdings, a total of 30 billion yen worth of JGBs went redeemed at maturity, while Asahi bought 20 billion yen worth of such special loss-absorbing debt known as TLAC (Total Loss-Absorbing Capacity), which offered more than 1 percent yield.

“We would like to buy such products in the second half as long as they offer an attractive yield,” Tsuruoka said.

Tsuruoka also said that Asahi reshuffled its bond holdings by selling short-dated bonds and buying longer-dated bonds, like 40-year bonds, to extend the duration of its bond holding by 1 year last year.

Its JGB holdings’ duration stood at 14.1 years as of the end of last fiscal year, and it wants to extend it to 14.5 years by the end of March, Tsuruoka said.

The insurer forecasts the dollar to trade between 105-120 yen for this financial year, compared to 112.55 yen on Tuesday. The insurer expects the 10-year JGB yield to trade between 0.0 percent and 0.25 percent, vs 0.145 on Tuesday.

Writing by Ayai Tomisawa

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