TOKYO, Oct 31: Japanese fund managers pushed their allocation for euro zone bonds to the highest level in 10 months as yields stabilised, but cut their overall exposure to bonds from last month’s record high as risk appetite revived, a Reuters poll found.
A survey of 10 Japan-based fund managers, polled between Oct. 17 and 24, showed allocations for euro zone bonds against those from other regions up at 22.2 percent, the highest rate since December 2011.
“We believe the ECB’s commitment to purchase Southern European government bonds regardless of their rating strongly underscores the downside of the asset class,” said Yoshino Akio, chief economist at Amundi Japan.
Bond yields in highly indebted Spain have come down since hitting euro-era highs in late July, but remain rewarding enough to entice yield-hungry Japanese investors, who reduced their holdings of domestic debt to a 10-month low of 38.2 per cent.
In another sign of improved risk appetite, bond allocations versus other asset classes dropped to 52.2 percent from a record high of 53.3 per cent in September, while equity allocations inched up to 41.2 per cent from 39.2 percent last month.
“There’s still little space to be optimistic about the global economy, but there are signs that the problems are bottoming out,” said Kenichi Kubo, senior fund manager at Tokio Marine Asset Management.
However, equity allocations remain below last year’s average of 44.4 percent and 45.7 per cent in 2010, while bond allocations are still at their second-highest level since the survey began in 1995.
“The flight to quality is still continuing, and it is hard to see when that situation will reverse,” said one fund manager who declined to be identified.
“However, interest rates are beginning to go up…I also expect the yen to ease slightly, although it will take some time before it makes a move like back in February,” he continued, referring to the currency weakening to 84.17 yen to the dollar on March 15 from 76 yen on Feb. 1.
The yen softened to a four-month low of 80.36 against the dollar on October 26 due to improved risk appetite on strong US data, signs that the pace of China’s slowdown is dropping, and expectations of further easing from the Bank of Japan.
(agencies)
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