Nippon Life to Buy More U.S. Corporate Debt on Low Hedging Costs

Japan’s biggest private life insurer is planning to buy more U.S. corporate bonds, adding to signs that investors from the nation are continuing to find value in the asset class after their hedging costs fell.

“Cheap hedging costs are still making U.S. debt attractive so we plan to continue investing in U.S. corporate bonds while being selective,” said Yusuke Sorita, deputy general manager at Nippon Life Insurance Co.’s credit investment department. Read more about the firm’s investing targets from earlier this year.

Nippon Life to Buy More U.S. Corporate Debt on Low Hedging Costs

The Federal Reserve’s monetary easing since earlier this year amid the Covid-19 pandemic has sent the three-month currency hedge cost for yen-based investors to around a five-year low. That’s helped keep demand strong for U.S. corporate notes, even after purchases surged to more than 1.4 trillion yen ($13.3 billion) in each month since March in the most recently available data through May from Japan’s finance ministry.

“Thanks to the cheap hedge cost and the Fed’s backstop, the U.S. credit market offers a sense of security,” said Masahiko Loo, a portfolio manager of fixed income at AllianceBernstein Japan, adding that U.S. credit is one of the few assets which offer solid returns amid the low interest-rate environment.

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