Fixed Income Commentary

Evolution of regional financial institutions' yen bond portfolios

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Evolution of regional financial institutions' yen bond portfolios

Key points
  • Regional financial institutions have tended to reduce interest rate risk in their yen-denominated bond portfolios during times of rising rates
  • But by doing so, they also increase opportunity risk and reinvestment risk
  • We expect these institutions will gradually extend bond portfolio duration in view of expected terminal rate

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