(Bloomberg) -- Nippon Life Insurance Co. plans to reduce its holdings of yen-denominated bonds in the second half of the fiscal year ending March 2025 as it prepares for higher interest rates.
The life insurer plans cuts in its yen bond holdings in line with the ¥380 billion ($2.5 billion) decrease in the fiscal first half, Akira Tsuzuki, executive officer of the company’s finance and investment planning department, said at a media briefing on Thursday.
Its holdings of Japanese government bonds including super-long yen debt increased in the fiscal first half, but its overall yen-denominated bond ownership dropped as it sold low-yielding assets in anticipation of rate increases, Tsuzuki said.
“In the second half of the year, we expect to see a certain amount of yield rises, so we will buy firmly where yields are good, and hold back where yields are a little low,” he said.
Nippon Life expects Japan’s 10-year yield to rise to 1.4% at the end of this fiscal year and the 30-year yield to be 2% to 2.5% by then. The insurer is predicting that the Bank of Japan will raise rates again at the end of this year or the start of 2025, Tsuzuki said. The benchmark 10-year yield was at 0.96% this week, after rising to as high as 1.1% in May. The 30-year yield was at 2.135%.
The 30-year yield is at “a sufficiently attractive level at the moment,” said Tsuzuki. “It’s more likely that the yield on bonds with maturities of 10 years or less will rise.”
In the first half of the year, the insurer reduced its holdings of hedged foreign bonds by ¥310 billion, while increasing unhedged overseas debt by ¥110 billion. In the second half of the year, it will increase its holdings of hedged foreign bonds, while keeping its holdings of unhedged foreign bonds flat or decreasing them, he said.
(Adds chart and more comments from Tsuzuki)
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