October 18, 2018 / 12:21 AM / 10 months ago

RPT-INTERVIEW-Japan's Daido Life plans to raise foreign corporate bond holdings

(Repeats for Asian morning readership. No change to text.)

* Plans to raise European holdings with shift from U.S. Treasuries

* Says market hasn’t fully priced rate increasesin Europe

* Also plans to increase foreign and domestic equities holdings

By Daniel Leussink

TOKYO, Oct 17 (Reuters) - Japan’s Daido Life Insurance plans to increase its holdings of stocks and foreign corporate bonds in the second half of its financial year to March, a senior company executive said on Wednesday.

Within foreign bonds, Daido plans to step up holdings of mainly currency-hedged investment-grade corporate bonds, Yoshihiro Okita, executive officer of investment planning, told Reuters.

The company also plans to shift further to European bonds from U.S. Treasuries but it is not looking to add to foreign government bonds overall, Okita said.

“We’ll increase foreign bonds but will generally go for corporate bonds,” Okita said, adding that Daido’s view on exposure to U.S. Treasuries is mainly a result of high dollar-hedging costs.

In contrast, the company plans to make investments in European bonds without a currency hedge, expecting the euro to strengthen against the yen during this financial year because interest rate increases in the euro zone have not yet been fully priced in.

Okita said that new purchases of bonds of European countries are likely to be in countries with relatively low political risk, such as Germany and France.

The company expects yields on U.S. 10-year Treasury notes to be at 3 percent by the end of next March, hovering between 2.7 percent and 3.3 percent.

“While they may get close to 3.3 percent, we don’t expect interest rates to increase so strongly,” Okita said.

Daido also plans to step up its holdings of foreign stocks, mainly in the United States, as well as domestic equities.

During the current financial year, Daido expects the dollar to move between 104 and 115 yen and to stand at about 110 yen next March, compared with 112.21 yen now.

In that period, the company also expects the euro to move in a range of 122 to 138 yen and to firm to 134 yen by the end of March, versus 129.73 yen now.

The insurer, a unit of T&D Holdings Inc, bought net 20 billion yen ($178 million) of foreign bonds and 40 billion yen of domestic bonds in the April-September period. It also bought 10 billion yen of foreign stocks and 25 billion yen of domestic stocks, Okita said.

Daido managed about 6.6 trillion yen ($58.82 billion) of funds as of June, including 1.9 trillion yen of holdings in foreign assets. ($1 = 112.18 yen)

Reporting by Daniel Leussink Additional reporting by Yoshiko Mori Editing by David Goodman

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