“There’s tremendous deflationary pressure in the U.S.,” says Mizuho Asset Management fund manager Yusuke Ito. “For bonds, the longer the maturity, the better." As U.S. investors exit duration in the domestic bond market, Japanese investors - to whom the U.S. 10-year yield of 2.84% looks positively towering - are snapping the paper up. The country's holdings of U.S. debt rose $98.2B in Q3, the 2nd largest increase since the data started becoming public 13 years ago.
“The Japanese have experience with 15 years of disinflation,” says Hideo Shimomura, chief fund investor at Mitsubishi UFJ. “Now it is spreading to the U.S. It’s worthwhile to take long-end risk in portfolios.”
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