Japan: Uridashi flows into TRY continued in November – Nomura

Foreign currency-denominated uridashi bond issuance slowed slightly in November to JPY56bn ($0.5bn) from JPY70bn in October, notes the research team at Nomura.

Key Quotes

“We estimate uridashi bond redemptions decelerated slightly in November too, to JPY92bm ($0.8bn) from JPY102bn in October. Net uridashi flows (issuance minus redemptions) remained net outflows/selling (JPY36bn) for the third month in a row.”  

“In November, EM currencies, especially TRY, attracted retail money in the uridashi bond market again. New issuance in TRY decelerated to JPY28bn ($0.3bn) from JPY35bn the previous month, but the amount remained high after recording the largest amount since April 2014 in October. Net flows were also net purchases for the fourth consecutive month (JPY25bn). TRY’s popularity in the uridashi bond market is still strong, although the fall in TRY/JPY continued in November. TRY’s share in total foreign currency-denominated uridashi bonds so far this year has recovered to 19%, on track to record its highest share ever. We also estimate that net flows have turned to net purchases for the first time since 2013. In contrast, there has been net selling of BRL in the uridashi market for the eleventh consecutive month. MXN flows have been mixed so far this year, while net MXN flows recorded small net purchases in November for the first time in two months. INR uridashi flows recorded net selling for the first time in at least five years, albeit at a small amount (JPY6bn).”  

“G10 currency-denominated uridashi bond issuance remained weak in November. There was no AUD-denominated uridashi bond issuance according to the Bloomberg database, although we estimate there were JPY23bn ($0.2bn) of redemptions during that period. Net USD flows recorded small net buying (JPY5bn) for the first time in three months.” 

“In December, we estimate foreign currency-denominated uridashi bond redemptions will accelerate to JPY123bn. BRL-denominated uridashi bond redemptions are estimated to remain high at JPY41bn, while we also estimate ZAR-denominated uridashi bond redemptions to be large (JPY25bn). Uridashi flows are likely to remain net BRL and ZAR selling. TRY-denominated uridashi bond redemptions should stay small (JPY4bn).”