US Treasuries prices rose this year as Japanese and European investors threw money abroad in the search for better returns, but the rising costs of overseas borrowing are sparking a sell-off.
The blame falls on the costs of hedging against foreign-exchange shifts across markets for cross-currency basis swaps and foreign-exchange forwards, the Wall Street Journal reports. Those extra costs are going a long way towards erasing some, if not all, of the extra income Japanese investors could reap from buying US Treasuries rather than investing at home.
That’s pushed Japanese investors to sell. In September they became net sellers of foreign bonds, unloading $18.9B worth in the two-week period ended Sept. 9, according to Nomura Securities International. [WSJ]
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