Euro-denominated JGBs become more attractive as hedging costs fall
Key points
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Carry on euro-denominated JGBs has improved as hedging costs have declined; yields now roughly comparable to those on similarly rated French and Spanish bonds
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We like 5-year (out to 10-year) maturities for their thick cushion (carry + rolldown) and also because they are less affected by supply/demand concerns in super-long sector
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Limited correlation of individual credit risk (ASW spreads) between Japan and eurozone offers diversification benefit
