Amundi Goes Overweight Japanese Bonds for First Time in 30 Years, Bets on Steeper Yield Curve Amid Policy Clarity

Europe's largest asset manager, Amundi, has shifted to a "slightly overweight" position on Japanese government bonds for the first time in 30 years, citing increased political stability.

This move was triggered by Prime Minister Takaichi's election supermajority, which reduced policy uncertainty, and cooling inflation, which eased pressure on the Bank of Japan.

Amundi is using a "curve steepener" strategy, betting that long-term (30-year) bond yields will remain volatile while mid-term (10-year) yields are anchored by stable policy and demand.

Europe's largest asset manager, Amundi, has made a significant shift in its strategy by becoming 'slightly overweight' on Japanese Government Bonds (JGBs) for the first time in three decades.

This decision is primarily driven by newfound political clarity in Japan. Prime Minister Sanae Takaichi's recent landslide election victory secured a supermajority in the lower house. This outcome significantly reduces the risk of policy gridlock that had previously worried investors, creating a more stable and predictable environment for investment.

Secondly, the economic backdrop has become more favorable. Recent data showed inflation is cooling, with the headline rate at 1.5%. This eases the immediate pressure on the Bank of Japan (BOJ) to raise interest rates aggressively. A more patient BOJ helps anchor interest rates for medium-term bonds, particularly the 10-year JGB, often called the 'belly of the curve.'

These factors create the perfect setup for Amundi's specific strategy: a 'curve steepener.' They are buying 10-year JGBs while simultaneously selling 30-year JGBs. The logic is that the 10-year yield will remain relatively stable, supported by the BOJ's cautious stance and consistent demand. In contrast, the 30-year yield is expected to be more volatile and potentially rise, as it is more sensitive to the government's long-term borrowing plans and supply dynamics.

Furthermore, global capital flows support this move. The yield gap between U.S. Treasuries and JGBs has narrowed to its tightest level since 2022, reducing the appeal of U.S. bonds for Japanese investors. Combined with rising trade policy uncertainty in Washington, this encourages a 'repatriation' of funds back into Japan, boosting demand for JGBs.

Yield Curve Steepener: An investment strategy that profits from the widening gap between long-term and short-term interest rates. It involves buying shorter-maturity bonds and selling longer-maturity bonds.
Belly of the Curve: A term for medium-term bonds, typically those with maturities between 5 and 10 years, which are found in the middle of the yield curve graph.
Risk Premium: The additional return an investor requires to hold a riskier asset compared to a risk-free one. Political uncertainty often increases the risk premium on government bonds.

Amundi Goes Overweight Japanese Bonds for First Time in 30 Years, Bets on Steeper Yield Curve Amid Policy Clarity

Europe's largest asset manager, Amundi, has shifted to a "slightly overweight" position on Japanese government bonds for the first time in 30 years, citing increased political stability.

This move was triggered by Prime Minister Takaichi's election supermajority, which reduced policy uncertainty, and cooling inflation, which eased pressure on the Bank of Japan.

Amundi is using a "curve steepener" strategy, betting that long-term (30-year) bond yields will remain volatile while mid-term (10-year) yields are anchored by stable policy and demand.

Europe's largest asset manager, Amundi, has made a significant shift in its strategy by becoming 'slightly overweight' on Japanese Government Bonds (JGBs) for the first time in three decades.

Yield Curve Steepener: An investment strategy that profits from the widening gap between long-term and short-term interest rates. It involves buying shorter-maturity bonds and selling longer-maturity bonds.
Belly of the Curve: A term for medium-term bonds, typically those with maturities between 5 and 10 years, which are found in the middle of the yield curve graph.
Risk Premium: The additional return an investor requires to hold a riskier asset compared to a risk-free one. Political uncertainty often increases the risk premium on government bonds.