UPDATE 1-Nippon Life to hold slightly more JGBs, reduce hedged U.S. Treasuries
* Plans to modestly increase holdings of JGBs after Y700 blnbuy
* To shift from Treasuries to U.S. corp bonds, euro debt
* Plan to raise holdings of foreign bonds without FX-hedging
* Plans to increase holdings of foreign stocks, including PE
(Adds details)
By Tomo Uetake
TOKYO, Oct 24 (Reuters) - Nippon Life Insurance Co plans to modestly increase its holdings of Japanesegovernment bonds in the six months through March 2019, whilereducing U.S. Treasuries with currency hedging, senior companyofficials said on Wednesday.
The insurer had already boosted its holdings of JGBs byabout 700 billion yen in the April-September period, marking amajor turnaround after many years of shifting out of Japanesebonds into foreign debt.
Along with many other Japanese institutional investors,Nippon Life had aggressively bought U.S. and European bonds withcurrency hedging as an alternative to low-yielding domesticbonds, but the cost of hedging has become expensive due torising U.S. interest rates.
As a result, JGBs look relatively attractive, even thoughthe insurer says their yield is still low.
"We'll buy JGBs aggressively only after super-long yieldsrise to and above 1 percent," said Naoki Akiyama, generalmanager of finance and investment planning, at a newsconference.
Earlier this month, the 30-year JGB yield climbed to 0.950 percent, its highest level since February 2016,and it currently stands at 0.895 percent. Yields on 20-year JGBs, a tenor of choice for Japanese life insurers,last stood at 0.660 percent.
Within the currency-hedged foreign debt space, Nippon Lifeplans to shift towards U.S. credit products, as well as Europeansovereign and corporate bonds, while reducing U.S. Treasuriesand mortgage-backed securities.
"We expect the hedging costs for U.S. dollar investmentswill remain high as the U.S. Federal Reserve is hiking interestrates," said Akiyama.
Nippon Life could consider increasing foreign bonds withoutcurrency hedging if the yen strengthens.
"Although we don't see much upside for the dollar/yen, wewill seize opportunities to add foreign bonds without currencyhedging when the yen strengthens."
The insurer, one of Japan's biggest institutional investorswith total assets of 65.4 trillion yen, also plans to increaseits holding of foreign stocks, including private equity funds.
The insurer continues to be committed to sustainable financeand investment, including green bonds and ESG (environment,social and governance)-labelled projects, and real assetsinvestment, officials said.
($1 = 112.60 yen)
(Reporting by Tomo UetakeEditing by Chang-Ran Kim & Simon Cameron-Moore)
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