Nippon Life’s attractive 30-year bonds: “If the rate exceeds 2%, we will advance investment” – FY2024 – Bloomberg

Nippon Life Insurance plans to steadily accumulate super-long-term bonds at the current yield level. Akira Tsuzuki, executive officer and head of the financial planning department, announced at the 2024 investment briefing session on the 24th that he would buy the plan ahead of schedule if the yield on 30-year bonds rose significantly above 2%.

Regarding 30-year bonds, whose yield has risen above 1.9%, Tsuzuki said, “I have been steadily buying 30-year bonds because they have become attractive.” In the second half of fiscal 2023, yields have declined and the pace has been restrained, but he said, “If it’s around this level, we will continue to buy on a regular basis.”

The 30-year bond yield is approaching the milestone of 2%. “Our investment stance will not change dramatically between the high 1.9% range and the low 2% range,” he said, but “If the stock rises firmly above 2%, we will buy it a little ahead of schedule.”

Mr. Tsuzuki expects the yield on 30-year bonds to be “flat or slightly above the current level, with the current average being around the current rate.” “If it exceeds 2%, it will be a buying opportunity, and I would like to make purchases in advance of my annual allocation.If the range itself is revised upward, I will move the allocation itself,” he said.

　　 Regarding the possibility of further interest rate hikes by the Bank of Japan, we assume an interest rate hike of up to 0.25% in the October-December period. The understanding is that there will be some time lag before the next interest rate hike. Mr. Tsuzuki says that the market consensus has fully factored in an earlier rate hike, and while he believes that yields will not rise much, he also predicts, “If the Bank of Japan raises interest rates more often, yields will rise as well.”

The company’s debt cost was around 1.8% as of the end of March 2023. Previously, the policy was to purchase bonds even if interest rates were low in order to reduce interest rate risk and narrow the duration gap, but “Currently, in addition to lower debt costs, interest rate risk has decreased considerably.” Therefore, we are now at a stage where we can make decisions based on the yield,” Tsuzuki said.

In FY2013, general account assets (excluding repos) increased by 1.5 trillion yen. According to Tsuzuki, the amount will increase by about 1.1 trillion yen in fiscal 2024. In fiscal 2023, the bank will increase domestic bonds by 710 billion yen, and in fiscal 2024 it is expected to increase by “approximately this amount.”

In FY2014, we will continue to invest in foreign corporate bonds with interest rates converted to yen using currency swaps, as well as invest in and replace government bonds while taking interest rate levels into account. Regarding the ratio between the two, Tsuzuki says, “In FY2013, government bonds accounted for just over half.In FY2014, it was roughly 50-50.”

[Nippon Life Insurance’s FY2024 Operation Plan]

domestic bonds	increase	Investment/replacement considering interest rate level
Hedged foreign bonds	increase	Expansion of variable interest rate assets that can withstand hedging cost fluctuations
open foreign bonds	Flat to decrease	Flexibly control foreign exchange risk according to foreign exchange and interest rate levels
Domestic and foreign stocks	increase	Foreign stocks, including alternatives, increased, while domestic stocks remained mostly flat.

[Financial environment outlook: outlook and range as of the end of March 2025]

Domestic 10-year interest rate (%)	0.9 (0.6-1.2)
US 10-year interest rate (%)	3.5 (2.0-5.0)
Nikkei average (yen)	36000 (30000-42000)
NY Dow (dollar)	38000 (32000-44000)
dollar yen (yen)	135 (120-150)
euro yen (yen)	150 (135-165)

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