A surge of yen-denominated bonds by foreign nationals and a perceived reduction in dollar supply are making it costlier to swap yen funds to the U.S. currency.
Three-month basis swaps for dollar-yen dropped to negative 53.5 basis points on Thursday, a level not seen since November 2023, meaning investors using yen to obtain dollar funding had to accept steeper discounts on Japanese interest rates. Five-year swap contracts fell to the lowest in almost two months this week.
A lack of dollars helped drive down short-dated basis swaps, while rising issuances of Samurai bonds impacted longer swaps, according to Shoki Omori, chief desk strategist at Mizuho Securities Co.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.