(Bloomberg)-Interest rate increases from Japan's bank should help cut currency defense costs to investors from Japan, triggering their craving for the corporate bonds of the US investment degree, according to Bank of America Corp.
Most read from Bloomberg
The BOJ raised its key policy rate last month to the highest level since 2008 in the midst of projections for higher inflation, firing expectations for further rate hikes and a flatter product curve for Japanese government bonds.
That should reduce the costs of foreign exchange hedges and improve the relative value of US high -grade bonds, stimulating Japanese demand for them, Bofa strategists wrote including Yuri Seliger in a note on Tuesday.
“The hedgerow cost is largely the difference in policy rates between the US and Japan,” the strategists wrote. “As a result, more Boj hikes would further reduce the hedgerow cost.”
Hedgerow costs for investors from Japan have fallen largely since October, with the Federal Fund having reduced its benchmark interest rate for the first time in more than four years in September. Three -month dollar hedges costs based on previous contracts for investors from Yen earlier this month reached their lowest level since September 2022.
A solid foreign demand for US corporate bonds produces high and hedgerow costs drawing companies to Japan, with people like Investo Ltd. are trying to grow their base from Japanese bond buyers. The average product on the US high -grade corporate bond was 5.31% on Tuesday, according to Bloomberg index data.
Most read from Bloomberg Businessweek
© 2025 Bloomberg lp