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Very much appreciate the shout-out from the @TheEconomist / Free Exchange.
economist.com/finance-and-ec…
economist.com/finance-and-ec…
@TheEconomist Before the global crisis, Europeans banks borrowed dollars to buy securitized U.S. mortgages on a massive scale.
Today Asian insurers, in Japan and Korea, but in particular in Taiwan, buy US corporate credit and hedge the fx risk short-term.
cfr.org/blog/are-asian…
Today Asian insurers, in Japan and Korea, but in particular in Taiwan, buy US corporate credit and hedge the fx risk short-term.
cfr.org/blog/are-asian…
@TheEconomist I should also note that Japan's Postbank and Norinchukin (basically Japan's policy banks) do the same thing, it isn't just the insurers ...
@TheEconomist Right now the risk is mostly theoretical. U.S. interest rates have fallen (including the interest rate on corporate bonds) so the insurers are sitting on mark-to-market gains ...
@TheEconomist But it is still worth noting where risk has accumulated in a low rate world -- low rates in Japan and Taiwan encouraged their financial institutions to look for yield abroad in a big way, and they have taken on new risks, including the risk of not being able to roll their hedges
