Wednesday 23 October 2019

Irish bonds big in Japan as investors seek an EU safe haven

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Chikafumi Hodo

For 17 straight months one name has been a constant presence on the trading blotter of Japan's investors - Ireland. Buoyant economic growth and improving fiscal conditions have attracted Japanese funds to Irish bonds, with purchases increasing in recent months even as uncertainty grew over whether the UK will leave the EU with or without a deal.

Investors bought a net 161.5bn yen (€1.26bn) of Irish debt in October - just below September's eight-year high of 183.1bn yen, extending a streak that began in June 2017.

Japanese funds have been looking for alternatives to traditional overseas investments such as US Treasuries this year as an increase in hedging costs lowered potential returns and as political risk turned them against continental European debt. Irish 10-year bonds yielded 0.97pc on Thursday, down from a February high of 1.20pc, but that compared with a return of just 0.035pc for Japanese equivalents.

"Irish bonds are attractive," said Tatsuya Higuchi, executive chief fund manager at Mitsubishi UFJ Kokusai Asset Management. "We've been maintaining our overweight position for a while given Ireland's healthy economic condition and in anticipation of seeing a possible upgrade in its credit rating."

Mitsubishi's flagship Global Sovereign Open fund, held 6.3pc of its portfolio in Irish sovereign bonds as of November 30. The fund started to build positions in Irish sovereign debt around the time credit ratings were raised to single A in 2014, Mr Higuchi said. Japanese fund managers see opportunities for Ireland despite Brexit.

Irish Independent

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