French bonds held by Japanese investors are far higher than the allocation level corresponding to the weight of the benchmark index, which increases the risk of a new round of sell-off and may further exacerbate the decline in the French bond market. According to calculations, as of July, French bonds held by Japanese investors are estimated to have reached 23 trillion yen, accounting for 6.6% of their total overseas bond holdings. Compared to the benchmark weight of Bloomberg's Global Composite Total Return Index, Japanese investors have the highest degree of overallocation of French bonds among countries in the Eurozone. France is facing a debt market crisis. Investors' confidence in French treasury bonds is deteriorating due to the government's failure to achieve its fiscal deficit target, policy impasse, and the possibility that next year's presidential election will completely change the direction of development of the country. After many rounds of political and market turmoil in the past, Japanese investors have been firm holders of French bonds, but the risk of a further sell-off this time is likely even higher. The reason is that rising domestic yields in Japan are making Japanese treasury bonds more attractive, thereby increasing investors' motivation to repatriate capital and possibly weakening a major support for European bonds. Hideo Shimomura of Fivestar Asset Management is one of the investors already betting on a further decline in French treasury bonds. “This is just the beginning,” Shimomura said of the French bond market sell-off. “If the ECB leaves it alone, then judging from the experience of the European debt crisis, the yield on French 10-year treasury bonds may rise as high as 7%, which is worrying.”
Zhitongcaijing · 1d ago
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French bonds held by Japanese investors are far higher than the allocation level corresponding to the weight of the benchmark index, which increases the risk of a new round of sell-off and may further exacerbate the decline in the French bond market. According to calculations, as of July, French bonds held by Japanese investors are estimated to have reached 23 trillion yen, accounting for 6.6% of their total overseas bond holdings. Compared to the benchmark weight of Bloomberg's Global Composite Total Return Index, Japanese investors have the highest degree of overallocation of French bonds among countries in the Eurozone. France is facing a debt market crisis. Investors' confidence in French treasury bonds is deteriorating due to the government's failure to achieve its fiscal deficit target, policy impasse, and the possibility that next year's presidential election will completely change the direction of development of the country. After many rounds of political and market turmoil in the past, Japanese investors have been firm holders of French bonds, but the risk of a further sell-off this time is likely even higher. The reason is that rising domestic yields in Japan are making Japanese treasury bonds more attractive, thereby increasing investors' motivation to repatriate capital and possibly weakening a major support for European bonds. Hideo Shimomura of Fivestar Asset Management is one of the investors already betting on a further decline in French treasury bonds. “This is just the beginning,” Shimomura said of the French bond market sell-off. “If the ECB leaves it alone, then judging from the experience of the European debt crisis, the yield on French 10-year treasury bonds may rise as high as 7%, which is worrying.”
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