BlueBay unveils launch of long-only Japanese government bond fund

By Junko Fujita

TOKYO, March 24 (Reuters) - RBC BlueBay Asset Management on Tuesday unveiled the launch of a long-only, yen-denominated fund focused on Japanese government bonds (JGBs), becoming the latest foreign investment firm to bet on the volatile debt market.

BlueBay is seeking to attract Japanese pension funds to its new fund, the BlueBay Investment Grade Japan Bond Fund, taking advantage of an expected repatriation of assets from foreign bonds.

As the Bank of Japan gradually reduces its presence in the JGB market, there is more opportunity for active fund managers in the sector, said Mark Dowding, BlueBay's chief investment officer for fixed income, in a statement.

"Five years ago, you couldn't really deliver alpha in Japanese fixed income," he added.

The JGB market, which had been sedate until the BOJ ended its negative interest rate policy in 2024, has experienced wild swings in recent months. Since fiscal dove Sanae Takaichi became prime minister in October, longer-term yields have shot up to record highs as concerns mounted about Japan's fiscal health.

Pension funds and foreign investors have been scooping up JGBs lately, while Japanese banks and insurers have been more cautious due to uncertainties about the timing of rate hikes from the BOJ.

Japanese trust banks, which buy JGBs for pension funds, were net buyers of the debt for a 10th consecutive month in February, buying 1.76 trillion yen ($11.10 billion), compared with 364 billion yen in purchases by major domestic banks, according to the Japan Securities Dealers Association.

Foreigners bought 3.79 trillion yen worth of JGBs in February.

BlueBay has been investing in JGBs for the past 15 years and has become more active in the super-long segment since late 2024, according to a spokesperson.

($1 = 158.5000 yen)