Currency-hedged Treasury yields for Japanese investors have risen above zero for the first time in more than two years as the Federal Reserve cut interest rates.
Yen-hedged 10-year US notes yielded 0.28%, after staying below zero since September 2022. Hedge costs, which are largely driven by differences in short-term interest rates between two economies, have slid about 170 basis points from a peak set in October 2023 as the Fed embarked on policy easing while the the Bank of Japan raised borrowing costs.
“Positive hedged yields increase investment appeal for US bonds,” said Eiichiro Miura, head of the strategic investment department at Nissay Asset Management Corp. in Tokyo. “Some investors may become more constructive in the next fiscal year” starting in April, he said.
While hedged Treasury yields are still regarded as insufficient for many local investors, because they are about a quarter of what Japanese 10-year…
