Amadeusz Juskowiak

Japanese demand for uk gilts seen rising

Japanese investor interest in British giltedged securities is growing rapidly due to expectations sterling will remain stable despite the drop in oil prices and on calculations gilt prices will firm bond managers said

Japanese British and US Securities houses have been expanding inventories of gilts to meet demand from investors seeking capital gains including city and trust banks which have been active on the US Treasury market they said

Dealing demand for gilts with coupons around 10 pct has been getting stronger the general manager of the local office of a British securities firm said

On the other hand major longterm investors such as Japanese insurance companies are not very enthusiastic about buying British securities ahead of the March 31 close of the Japanese financial year traders said

These investors who must convert yen into sterling through dollars for British securities purchases appear to be buying in London rather than in Tokyo a bond manager for a British securities house said

The sterlingyen rate was about 2403444 today up from 23450 at the start of the calendar year and a narrow range of 230 to 234 late last year

Many bond traders in Tokyo are doubtful that sterling will further appreciate steeply However gilts may benefit from further declines in UK Interest rates they said

The UK Government is in no hurry to issue more bonds suggesting further market improvement and continuing demand from brokers here said Laurie Milbank and Co assistant manager Machiko Suzuki

She said she expected the yield on the actively traded 1134 pct gilt due March 2007 to dip below 95 pct against 9581 pct at yesterdays close in London