Euro/yen shorts on Japan investors' OAT sales overdone, UBS says
TLT•UBS says concerns about Japanese investors selling French government bonds are valid but not particularly timely, as they have sold 7.8 trillion yen ($49.23 billion) of French long-term debt since mid-2022. The bank also says bets on French asset sales pushing euro/yen lower appear overdone.
1. Japanese holdings fall
UBS forex strategist Alvise Marino says Japanese investors have mostly been net sellers of euro area long-term debt assets since mid-2022, including 7.8 trillion yen ($49.23 billion) of French long-term debt. As of the end of 2025, French government bonds, or OATs, accounted for 7.3% of Japanese investors’ total holdings, down from a 2019 peak of 11.1% and a historical low.
2. Euro/yen positioning
Marino says options markets are especially positioned for French asset sales to push euro/yen lower, with risk reversals showing the strongest preference for puts over calls among euro pairs after adjusting for implied volatility. He considers that positioning overdone, noting that recent Japanese sales of French debt were recycled into other foreign assets rather than repatriated. “This adds to our scepticism about repatriation flows driving yen strength,” he said.
