Japanese investors buy UK government bonds at record rate in early 2021

Japanese investors buy UK government bonds at record rate in early 2021

Japanese investors snapped up UK government bonds at the quickest pace on record at the start of 2021 as fading Brexit risks removed a barrier to investment in British assets.

Data from Japan's ministry of finance released this week showed investors purchased ¥714bn (£5bn) of UK gilts on a net basis in January, the biggest monthly figure in Bloomberg records dating back to 2005.

The buying spree reflects investment managers boosting the share of UK gilts in their portfolios following the UK-EU trade agreement struck on Christmas Eve, after shying away from British bonds throughout the turbulent Brexit process over fears of sharp moves in sterling.

"Confidence rose that Brexit uncertainty was behind us,“ said Derek Halpenny, head of research for global markets at Japanese bank MUFG. He said the large inflows showed investors returning to a "more normal balance“ of gilts after a "long period of under investment“.

Japanese investors were net sellers of gilts during the period from the Brexit referendum in 2016 through to the end of 2020, which Halpenny said was "very unusual“.

Hideki Kishida, senior economist at Nomura, said Japanese investors had been underweight gilts because they did not want to take on currency risk. The pound moved dramatically in wake of the