Japanese investors remained cautious on overseas debt markets, selling foreign long-term bonds for the seventh time in eight weeks as they assessed US inflation trends and the outlook for Federal Reserve interest rates, according to a report by Reuters.

Japanese investors sold a net 537.6 billion yen ($3.36 billion) worth of foreign long-term bonds in the week ended November 7, partly reversing the previous week's net purchases of 1.31 trillion yen, according to Ministry of Finance data cited by Reuters. However, they purchased 66.3 billion yen worth of foreign short-term bills.

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The selling came even as US Treasury prices rallied, pushing yields on benchmark 10-year government bonds to 4.8103%, their lowest level since September 9. Yields had climbed to a 24-and-a-half-year high of 5.3645% in early October. Bond prices and yields move in opposite directions.

Japan held approximately $1.07 trillion in US government securities as of August, making it the largest foreign holder of US Treasuries, according to US Treasury Department data cited by Reuters.

Japanese investors have sold a net 4.85 trillion yen worth of foreign bonds so far this year, marking the biggest net outflow since 2022, as per the report.

Market expectations around US monetary policy have also influenced investment decisions. Stronger-than-expected US job growth in October and hotter-than-expected consumer price inflation strengthened expectations of a Federal Reserve interest rate hike in December. Before the inflation data was released on Tuesday, Fed Governor Christopher Waller had also backed a December rate increase, even if inflation cooled.

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Japanese investors also withdrew a net 643.9 billion yen from foreign equities during the week, ending a three-week streak of net purchases, according to Reuters.

Meanwhile, foreign investors purchased a net 1.37 trillion yen worth of Japanese long-term bonds, marking their sixth consecutive week of net buying. However, they sold 1.5 trillion yen in Japanese short-term bills, the largest outflow since October 17.

Foreign investors also sold a net 105.2 billion yen worth of Japanese equities, ending two consecutive weeks of net purchases, the report stated.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)