U.S. Treasurys are off to their worst start to a year in over four decades, but a familiar set of supporters may soon ride to their rescue.
Momentum is building for Japanese investors — the biggest foreign holder of U.S. bonds — to ramp up purchases, with recent auctions showing strong overseas demand and fund managers signaling there’s no real alternative. They are seen waiting for a volatile March to pass before positioning for the start of the new fiscal year in April — having been notable bond sellers on accelerating bets of Federal Reserve rate hikes.
"In the new fiscal year, there is no change for U.S. Treasurys to be quite an important investment destination for Japanese investors,” said Satoshi Nagami, head of the asset allocation group at Sumitomo Mitsui DS Asset Management Co. But "until U.S. monetary policy path becomes firm and clear, it would be difficult to immediately jump in on buying.”