RetireJapan

Hello everyone,

I hoped to crowdsource the answer to this question. Basically I am looking for a short term US treasury fund (0-3 years) that hedges to JPY (i.e.: protects against depreciation of the dollar). The closest I have found is the iShares Core 7-10 Year US Treasury Bond JPY Hedged ETF (1482.T) but the duration is too long - I would much prefer to have something in the 0-1 year duration or 0-3 year duration as they have the highest interest rates and least duration risk.

Has anyone ever come across any domestic funds or ETFs that offer this exposure? Cheers!

eyeswideshut wrote: ↑Mon Jun 03, 2024 7:51 am Hello everyone,

I hoped to crowdsource the answer to this question. Basically I am looking for a short term US treasury fund (0-3 years) that hedges to JPY (i.e.: protects against depreciation of the dollar). The closest I have found is the iShares Core 7-10 Year US Treasury Bond JPY Hedged ETF (1482.T) but the duration is too long - I would much prefer to have something in the 0-1 year duration or 0-3 year duration as they have the highest interest rates and least duration risk.

Has anyone ever come across any domestic funds or ETFs that offer this exposure? Cheers!

I do not think an ETF like that could exist as the price of the currency contracts would make it an extremely unfavorable return/fee wise.

Have a look at the pricing on short-term currency contracts and you'll see the rub.

I do not think an ETF like that could exist as the price of the currency contracts would make it an extremely unfavorable return/fee wise.

Have a look at the pricing on short-term currency contracts and you'll see the rub.

Do you mean the hedging contracts? Not really my area of expertise so I am not aware of the challenges and, to be honest, have no idea how hedging is done in practice , but these types of funds/etfs do exist overseas- (https://www.ishares.com/uk/individual/e ... -dist-fund) for example. Unfortunately it only offers GBP and EUR hedges.

Given the popularity of USD treasuries in Japan I was hoping there would be something available in this space here.

eyeswideshut wrote: ↑Tue Jun 04, 2024 1:38 am

I do not think an ETF like that could exist as the price of the currency contracts would make it an extremely unfavorable return/fee wise.

Have a look at the pricing on short-term currency contracts and you'll see the rub.

Do you mean the hedging contracts? Not really my area of expertise so I am not aware of the challenges and, to be honest, have no idea how hedging is done in practice , but these types of funds/etfs do exist overseas- (https://www.ishares.com/uk/individual/e ... -dist-fund) for example. Unfortunately it only offers GBP and EUR hedges.

Given the popularity of USD treasuries in Japan I was hoping there would be something available in this space here.

Currency hedging is not free, someone has to take the other side of the bet. (I e betting that the yen will continue to depreciate or stay flat).

These funds are just a standard bond fund, plus a whole bunch of currency contracts. The contracts themselves vary in price depending on the market.

A lot of the currency difference between the yen and the dollar is related to interest rates.

Thus a strengthening of the yen would probably relate to a drop of us bond yields.

It's possible we might see something like that in the future, the short-term Bond ETFs just came on to the market in the last few years here. I don't think they can make running a hedge short-term Bond ETF really a profitable and stable venture yet.

Thanks for the reply. It would be nice if there was such a fund as you would be able to benefit from the high yields of short term USTs whilst mitigating currency risk if the Yen does finally start to appreciate again. Anyway, maybe someone from eMaxis will read this thread and decide it is a good idea to launch one

eyeswideshut wrote: ↑Tue Jun 04, 2024 4:24 am Thanks for the reply. It would be nice if there was such a fund as you would be able to benefit from the high yields of short term USTs whilst mitigating currency risk if the Yen does finally start to appreciate again. Anyway, maybe someone from eMaxis will read this thread and decide it is a good idea to launch one

Check out TYO: 133A or 2012 for unhedged. They are very new listings. Their volume will probable dictate if we'll see other versions in the future.

Tsumitate Wrestler wrote: ↑Tue Jun 04, 2024 5:40 am

eyeswideshut wrote: ↑Tue Jun 04, 2024 4:24 am Thanks for the reply. It would be nice if there was such a fund as you would be able to benefit from the high yields of short term USTs whilst mitigating currency risk if the Yen does finally start to appreciate again. Anyway, maybe someone from eMaxis will read this thread and decide it is a good idea to launch one

Check out TYO: 133A or 2012 for unhedged. They are very new listings. Their volume will probable dictate if we'll see other versions in the future.

Thanks for the heads up… 2012 looks like a yen denominated version of iShares’ SGOV. Might be a nice ETF to stash some yen for a few months… maybe after BOJ has another round of currency interventions…

This is probably too long for you but I'll just throw it out there:

TSE Ticker Code 2856: ｉシェアーズ　米国債３－７年　ＥＴＦ（為替ヘッジあり）
Hedged, average bond duration is about four years.


This is my very very tentative plan for when I retire (I posted it on another RetireJapan thread for feedback )
Yen in fixed-term deposits (abysmal interest rates might improve slightly by the time I retire)
Get a 3-7 year US treasury ETF (hedged) (average bond duration 4 yrs) (TSE ticker: 2856)
Hold on to some of my eMaxis SLIM Bonds (unhedged, average bond duration 7 years)
Consider Japanese MMFs if the rates are any better by then.
Scale down the weighting for equities.