Japan's GPIF to avoid Chinese govt bonds even after benchmark inclusion – Reuters

Japan's Government Pension Investment Fund (GPIF) said in a statement on Wednesday, it will not invest in yuan-denominated Chinese government bonds due to settlement and liquidity issues, per Reuters.

The fund said, it will exclude Chinese government bonds from its benchmark after FTSE Russell's widely-used World Government Bond Index (WGBI) starts to include Chinese bonds later this year.

"Chinese government bonds cannot be settled in an international settlement system that can be used for other major government bonds. The market's liquidity is still limited compared with the size of GPIF's investment scale. Trading of futures is not allowed for foreign investors," Masataka Miyazono, President of GPIF, cited.

Market reaction

USD/JPY is off the 18-month tops of 111.68, currently trading at 111.54, modestly flat on the day. The retreat comes on the back of risk-off trading in the Asian equities.