Super-Long JGBs See Seven-Month Buying Streak by Foreigners

Foreign investors extended their purchasing spree of super-long Japanese government bonds (JGBs) for a seventh consecutive month in July, acquiring 479.5 billion yen ($3.3 billion) worth of debt maturing in over 10 years. This sustained buying, the longest streak since May 2022 and driven by attractive interest rates, propelled aggregate foreign buying to a new peak for the January-July period, signaling continued global demand for higher-yielding Japanese sovereign debt.

Analysis

Foreign investors have demonstrated a sustained and significant appetite for ultra-long-term Japanese Government Bonds (JGBs), extending their purchasing streak to seven consecutive months. Data from the Japan Securities Dealers Association confirms a net purchase of 479.5 billion yen ($3.3 billion) in July for bonds with maturities exceeding 10 years, marking the longest continuous buying period since May 2022. This activity, attributed to the allure of higher relative interest rates, has driven cumulative foreign purchases in the January-July period to a new record high. The persistent inflow represents a strong technical tailwind for the long end of the JGB curve and signals a bullish positioning from international capital, which views current Japanese yields as attractive on a relative basis.

Key Decisions for Investors

• Given the strong and persistent foreign demand, investors should recognize the technical support for long-dated JGB prices, which may dampen volatility and limit further yield increases in the near term.
• Macro investors should monitor whether this capital inflow into JGBs, driven by yield-seeking behavior, begins to provide more durable support for the Japanese Yen.
• It is critical to assess the durability of this trend, as a shift in Bank of Japan policy or a rise in global bond yields elsewhere could rapidly reverse these foreign capital flows.