Korea Investment Enters Super-Long JGBs as Japan Weighs Issuance Cut

Korea Investment & Securities Co., which manages roughly US$63 billion in assets, plans to buy unhedged Japanese Government Bonds with maturities of 20 to 40 years, marking its first foray into the super-long segment. The Seoul-based firm cites the rich yields on offer—now at their highest levels in decades—and an expectation that a firmer yen will bolster returns. The move comes as Japan’s Ministry of Finance has begun sounding out primary dealers on a potential reduction in the supply of super-long JGBs, according to the Nikkei. Officials are circulating questionnaires ahead of a meeting scheduled for September, and a cut would be the second adjustment to issuance this fiscal year. Yields on 30-year JGBs recently climbed to their highest since the bond was introduced in 1999, outstripping comparable South Korean sovereign debt by about 40 basis points. Foreign appetite for the securities has already extended to a seventh consecutive month, and the prospect of tighter supply could lend further support to prices.