Bloomberg News

Japan’s Two-Year Yields Fall to 2011 Low on U.S. Growth Concern

June 23, 2011

June 23 (Bloomberg) -- Japanese bonds gained, pushing two- year yields to the lowest this year, before U.S. reports that economists said will show home sales dropped in May and employers aren’t slowing job cuts.

Benchmark 10-year securities advanced for a second day as Asian stocks declined after the Federal Reserve cut its forecast for U.S. growth at a policy meeting yesterday and refrained from announcing additional stimulus. Bonds rallied even as demand declined at a 2.6 trillion yen ($32.3 billion) auction of two- year notes.

“Bonds are being bought because the market is concerned the U.S. economy will slow,” said Toru Suehiro, a market analyst in Tokyo at Mizuho Securities Co., one of the 24 primary dealers obliged to bid at the government’s debt sales.

The 10-year yield dropped 1.5 basis points to 1.105 percent as of 1:56 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.2 percent security due June 2021 gained 0.135 yen to 100.853. The yield matched the levels set on May 16 and June 17, the lowest since November.

Two-year yields were unchanged at 0.15 percent after dropping to 0.145 percent, also the least since November. Ten- year bond futures for September delivery added 0.13 to 141.26 at the Tokyo Stock Exchange

U.S. new home sales declined 4 percent to a 310,000 annual rate last month, according to a Bloomberg News survey before the Commerce Department report. Initial jobless claims were little changed last week at 415,000, a separate survey showed.

Forecasts Cut

The Fed lowered its forecasts for growth and employment for this year and 2012 at its two-day meeting. There was no mention of additional versions of its bond-buying program, the second round of quantitative easing, that ends this month.

The MSCI Asia Pacific Index of shares lost 0.7 percent and the Nikkei 225 Stock Average dropped 0.1 percent.

The two-year sale drew bids for 3.94 times the amount on offer, compared with a so-called bid-to-cover ratio of 5.31 times at the previous auction last month. The lowest price was 100.085 yen, below the 100.090 level predicted by 12 traders in a Bloomberg survey.

“Demand at today’s auction was a bit weaker as investors were cautious,” Mizuho’s Suehiro said. “But buying pressure for short-term debt has been increasing and demand will likely continue to be resilient.”

--Editors: Nicholas Reynolds, Rocky Swift

To contact the reporters on this story: Monami Yui in Tokyo at

To contact the editors responsible for this story: Rocky Swift at

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