Nippon life to boost domestic bonds, seeks chance to buy foreign bonds

Reuters

* To increase yen bond holdings, but may limit if yields toolow

* Ready to buy foreign bonds without FX hedging if ratesfavourable

* Nippon Life sees dollar/yen moving in Y93-103 in Oct-March

* Yen bond portfolio up Y620 bln, foreign bonds up Y190 blnin Apr-Sept

By Hideyuki Sano

TOKYO, Oct 22 (Reuters) - Japan's Nippon Life Insurance plans to increase yen bond holdings in the six monthsto March but is also ready to buy foreign bonds as well if itcan buy dollars and euros on dips, a company official said onTuesday.

Although the Bank of Japan's radical monetary easing inApril sparked speculation many Japanese life insurers mightstampede into foreign bonds to earn higher income, Nippon Life'sstance is a reflection of little change in industry investmentpatterns.

In the six months ended in September, Japan's largestprivate life insurer with total assets of about 55 trillion yen($560 billion), increased its domestic bond holdings by 420billion yen to 24.54 trillion yen.

It increased foreign bonds by 190 billion yen to 8.53trillion yen. But the currency hedge ratio, closely tracked bytraders for its impact on currency markets, fell only a littleto 72.2 percent in September from 74.9 percent in March.

"We think the yen will be boxed in a range although Japan'scurrent policy is likely to weaken the yen on the whole. Ifthere are good opportunities, we want to increase foreign bondswithout currency hedging," said Hiroshi Ozeki, general managerof finance and investment planning at Nippon Life.

"We want to buy (foreign currencies) at a favourable rate.If there are no dips, we will rather hedge our foreign bondinvestments," Ozeki told a news conference.

Ozeki steered clear of saying exactly what levels he sees asattractive. But he said the company sees the dollar tradingbetween 93 and 103 yen.

The dollar hit a 4-1/2-year high of 103.74 yen in Mayon hopes of aggressive policy easing by the Bank of Japan but ithas been stuck in a range around 95-100 yen since then.

Ozeki said Nippon Life would continue to pour a big part ofits new money into domestic bonds in the current half year toMarch.

But he also said the insurer may limit buying in yen bondsif their yields fall too low.

The 10-year Japanese government bond yield fell to a five-month low of 0.615 percent last week.

"At current yield levels, we won't be aggressively buyingJapanese bonds although I wouldn't say we won't buy at all," hesaid.

On the other hand, the insurer has a more favourable view ofdemand for U.S. bonds than before as it expects U.S. growth tobe damaged by political wrangling over debt and spending thatled to the recent government shutdown.

"The political stalemate will not change at least untilmid-term elections next year. So rather than holding off buyingTreasuries, we think we should stay in the U.S. market and earnincome," Ozeki said.

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