(Bloomberg) -- Japanese investors bought German and French bonds in February, when deepening concern over Europe’s economic slowdown spurred speculation the region’s central bank would join the Federal Reserve in turning dovish on monetary policy.

Key Insights

Market Comments

• The outlook for European bond prices brightened in February, as prospects of the ECB potentially tightening monetary policy receded following the Fed’s dovish stance, says Tsuyoshi Ueno, senior economist at NLI Research Institute in Tokyo
• Funds may have become enthusiastic about German bonds as their positions were light after having unloading the notes in the previous few months: Ueno
• “It was probably difficult for Japanese investors to invest in U.K. bonds as prospects for a Brexit outcome continued to change very rapidly”
• “As Japan’s 10-year bond yield fell deeper into the negative territory, demand for buying foreign bonds by domestic investors appears to have intensified”

Numbers

• Table below shows net buying/selling of overseas sovereign bonds in billions of yen, based on data from Japan’s Ministry of Finance:

• NOTE: Sovereign bonds refer to securities issued by governments, government agencies and local authorities, and those with the original maturities of more than one year

Background

©2019 Bloomberg L.P.