Asian Investors Warm Up to Neglected JGBs as Yields Hit Decades-Old High

Investors in Asia are starting to take interest in Japanese Government Bonds (JGBs) as yields hit levels not seen in decades, according to State Street's senior fixed income strategist Masahiko Loo.

The big sovereign wealth funds in the region have historically shown little interest in JGBs, but this year they began asking about how to neutralize their underweight positions.

Loo noted that even Australian pension funds, which typically don't invest in JGBs or Japanese Yen exposure, are now showing interest due to the currency's extremely low levels.

The Japanese Yen has fallen by over 40% against the US dollar from its early 2021 level of 103 to the current level around 158.

Despite this, Loo believes investors may be overlooking the potential for intervention by US Treasury Secretary Scott Bessent through the Foreign and International Monetary Authorities (FIMA) Repo Facility.