Tag: returns

China is snapping up Japanese government bonds, and it’s not just for the returns

  • China bought 1.46 trillion yen ($13.8 billion) in medium to long-term Japanese government bonds on a net basis between April and July. That was 3.6 times more than the same period last year.
  • In the same period, the U.S. increased its purchases by only 30%, in comparison. Europe, meanwhile, sold off 3 trillion yen worth of JGBs.
  • Yields on such bonds are near zero, making them an unlikely option as an investment. But analysts told CNBC there are other reasons why China would want to buy those bonds.

text, calendar: Bank notes of the Chinese yuan, Japanese yen and the U.S. dollar.

© Provided by CNBC
Bank notes of the Chinese yuan, Japanese yen and the U.S. dollar.

SINGAPORE — China’s recent purchase of Japanese government bonds surged to the highest level in more than three years – as the country more than tripled its holdings between April and July this year, compared to the previous year.


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During those three months in 2020, China bought 1.46 trillion yen ($13.8 billion) of medium- to long-term JGBs on a net basis, according to Japanese media Nikkei, which cited data from Japan’s finance ministry and its central bank. That was 3.6 times more than the same period last year.

In comparison, the U.S. increased its purchases by only 30% in the same period, that data reportedly showed. Europe, meanwhile, sold off 3 trillion yen worth of JGBs, according to Nikkei.

Yields on JGBs are around zero, making them an unlikely option as an investment since the returns are comparatively low.

But analysts told CNBC there could be other reasons why China would want to buy those bonds.

“One of the odd things about the current environment is that JGBs are no longer an obviously unattractive fixed income security, depending on the currency you are funding the purchase in,” said Ross Hutchison, investment director of global fixed income at Aberdeen Standard Investments.

Chinese government bonds are an attractive proposition: JPMorgan Private Bank



For instance, China can actually earn more on the investment by buying 30-year JGBs in the Japanese yen and swapping their currency exposure back into U.S. dollars, said Hutchison. It can pick up an additional 0.56% by doing so, according to him. Longer term bonds typically have higher yields as investors need to take on higher risks for holding on to them for a longer period of time.

The practice of a currency swap is when two parties exchange an equivalent amount of money with each other in different currencies, in order to protect themselves from further exposure to exchange rate risk, for instance.

“Many reserve managers buy JGBs and then swap or hedge the currency back into dollars, earning an additional ‘basis’ premium,” said David Nowakowski, a senior strategist of multi-asset and macro at Aviva Investors.

It’s also possible that China may be trying to manage the appreciation of the yuan, as the Chinese currency spiked against the Japanese yen in June, Hutchison pointed out. Selling off the yuan to buy JGBs, which are denominated in yen, could

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Trump returns to public events with ‘law and order’ speech at White House

Defiant in the face of slipping opinion polls, and determined to justify his implausible claim of a swift and full recovery from his encounter with Covid-19, Donald Trump returned to public events on Saturday with a brief “law and order” speech from a White House balcony.

a man standing next to a clock: Photograph: REX/Shutterstock

© Provided by The Guardian
Photograph: REX/Shutterstock

In a closely-watched first public appearance at a live event just six days after he left Walter Reed medical center following a three-night stay, the president delivered an 18-minute scripted address to a crowd on the South Lawn. It had been billed as “2,000 invited guests” but in reality a gathering of about 500 mostly young flag-waving supporters, some of whom appeared to be not properly wearing masks.

Donald Trump standing in front of a building: Donald Trump removes a mask ahead of speaking from a balcony at the White House on 10 October.

© Photograph: REX/Shutterstock
Donald Trump removes a mask ahead of speaking from a balcony at the White House on 10 October.

Related: ‘A surreal reality show’: Trump’s terrible week after his Covid diagnosis

Trump was maskless during the speech, during which he appeared to show no lingering signs of coronavirus. But questions about the president’s health are still swirling following the refusal of doctors or aides to reveal when he last tested negative for coronavirus.

Today’s lunchtime in-person event also appeared to counter his government’s own health guidelines over large gatherings and social distancing as the attendees clustered together tightly in front of the balcony and cheered loudly at his remarks.

The campaign-style rally came after another tumultuous week in which Trump lost further ground to his Democratic challenger, Joe Biden, and with the 3 November general election little more than three weeks away.

a group of people posing for the camera: Supporters cheer on Donald Trump during his White House event on 10 October. Photograph: Tom Brenner/Reuters

© Provided by The Guardian
Supporters cheer on Donald Trump during his White House event on 10 October. Photograph: Tom Brenner/Reuters

Video: White House spokesman sidesteps question on Trump’s last negative coronavirus test (The Washington Post)

White House spokesman sidesteps question on Trump’s last negative coronavirus test



He explored several familiar themes in his speech, attacking Democrats for an agenda he said was “beyond socialism” and promising again that the battle against Covid-19, which has claimed more than 210,000 American lives, was being won.

He also touted, with little evidence, “the fastest economic recovery in history”, and heaped praise on Black and Hispanic voters in an apparent attempt to shore up support from demographic groups that polls suggest he has been making inroads with recently.

“We’re starting very, very big with our rallies and with our everything because we cannot allow our country to become a socialist nation,” he said.

As for coronavirus: “It’s going to disappear, it is disappearing,” he added, pledging that a vaccine was coming in “record time”, and contradicting growing evidence of a new autumn surge of the virus in many states. Twice he referred to Covid-19 as “the China virus”, resurrecting a racist theming of a pandemic that has affected almost every country in the world.

Trump also praised law enforcement, and repeated again his unfounded assertions of “crooked ballots and a rigged election”.

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Society split on remedy as Holohan returns to helm

Many people spent Monday scratching their heads trying to understand what had happened since last week to justify the National Public Health Emergency Team’s shock escalation of their concerns.

Last Thursday, acting chief medical officer Dr Ronan Glynn wrote to the Government noting a number of trends of concern but said “the current epidemiological data does not strongly support a move to Level 3 nationally at this time”.

Just three days later, chief medical officer Dr Tony Holohan, back at the helm after a period of personal leave, recommended nationwide Level 5 measures for four weeks.

In tone and content, the two letters are similar, and many of the trends highlighted by Holohan are the same as those mentioned by Glynn the week before, with some deterioration in figures over the few days.

However, the second letter highlights other trends not mentioned in the first, and these may have clinched the argument for the public health officials meeting on Sunday. These include a “sustained increase” in cases among older people, seven new outbreaks in nursing homes last week and a rise in deaths, from four in August to 34 in September.

Everyone is bound to be haunted by the scale of deaths that occurred in nursing homes last spring. The spectre of a possible repeat of this fiasco must have loomed large when officials were considering what to do now.

Sudden lurch

Otherwise, the proposal to jump three levels of the Government’s framework plan makes no sense. We are supposed to be nimble and agile in responding to this virus. A stepwise approach would see areas constantly being bumped up and down levels in accordance with prevailing trends, not lurching suddenly almost from one end of the spectrum of restrictions to the other.

An alternative explanation would look to the authors of the two letters; the first written by an interim postholder, the second by an experienced and forthright chief medical officer well-versed in dealing with Ministers. Dr Holohan’s prescription is, arguably, more internally consistent in that he paints a dire picture of the harms being wrought by the virus and then proposes administering strong medicine to deal with it.

Cases are rising generally across Europe, but Ireland is ahead of the curve in entertaining proposals for a second lockdown. Infections in Spain and France may be soaring, but other countries – Germany, Greece, most of the Nordic nations – seem to be coping with more modest increases.

In most of western Europe, death rates remain comparatively low despite the rise in cases. For example, smaller countries such as Luxembourg and Iceland have higher case rates than Ireland, but virtually no deaths to speak of in recent months.

Stretched health service

Here, officials constantly say cases among vulnerable older people are inevitable, though this is not the experience of other countries. It begs the question as to whether everything that could be done had been done to reform work practices and improve infection control in some nursing homes.

Maybe it

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