Japanese investors are selling record amounts of Australian debt, betting a rout in the yen that sent it to a four-year low against the Aussie dollar has run its course.
The biggest investors in Australia’s bonds cut holdings by 652.6 billion yen ($7 billion) over November and December, the most in Ministry of Finance data going back to 2005. Benchmark 10-year yields climbed 57 basis points since Sept. 30, heading for the longest stretch of monthly increases in 3 1/2 years. Australian government bonds returned 37 percent in yen terms over the past five years, the most among 26 developed markets tracked by Bloomberg.
The yen tumbled against the so-called Aussie and other currencies over the past six months as Japanese Prime Minister Shinzo Abe prodded the central bank to pump money into the economy. The currency is reaching “equilibrium” against the U.S. dollar, Kazumasa Iwata, a former deputy head of the Bank of Japan and a candidate to take over as the next central bank governor, said last week. Not only is investing in Australia expensive, improvement in Europe’s debt crisis is curtailing demand for the haven of Australia’s AAA rated debt.