Major Japanese life insurers are taking a cautious approach to Japanese government bond investments as volatility rises and yields hit historic levels, Nikkei reported Thursday.
At Dai-ichi Life Insurance (TYO:8750), Managing Executive Officer Kazuyuki Shigemoto said timing purchases of long-dated bonds has become difficult amid uncertainty over inflation, fiscal policy and geopolitical tensions, including developments in the Middle East, the report said.
The company is wary of locking in positions that could quickly move into losses even as 40-year yields near 4% are seen as attractive in some scenarios, according to the report.
At Nippon Life Insurance, Executive Officer Keisuke Kawasaki said volatility in long-term rates has increased due in part to leveraged flows from overseas investors. The company continues to buy long-duration bonds but is also relying more on derivatives to manage timing and returns, the report said.
Fiscal uncertainty, energy costs and geopolitical risks are shaping their outlook, while the path of Bank of Japan rate hikes remains gradual but data-dependent, according to the report.
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