Bloomberg News

Japan’s Bonds Decline as Stocks Gain, Greek Default Risk Eases

June 30, 2011

June 30 (Bloomberg) -- Japan’s bonds dropped for a second day after Asian stocks extended a global rally in equities, decreasing demand for the relative safety of government debt.

Yields on benchmark 10-year bonds advanced to a two-week high as the Greek parliament’s passage of an austerity package reduced the risk the nation will default. Treasuries slumped in New York yesterday, with 10-year yields surging 25 basis points this week.

“The gain in stocks isn’t a positive for the bond market,” said Shinji Nomura, chief debt strategist in Tokyo at SMBC Nikko Securities Inc., one of the 24 primary dealers obliged to bid at government debt sales. “There is an unwinding of the flight to quality because Greece looks like it will avoid default.”

The benchmark 10-year yield added 1.5 basis points to 1.13 percent as of 3:23 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.2 percent security due June 2021 lost 0.136 yen to 100.626 yen.

The yield touched 1.14 percent, the highest level since June 15. It has fallen 12.5 basis points for the past three months, the biggest quarterly decline since September.

Ten-year bond futures for September delivery dropped 0.30 to 141.04 at the 3 p.m. close of the Tokyo Stock Exchange.

The MSCI Asia Pacific Index of regional shares climbed 1.4 percent, after the Standard & Poor’s 500 Index advanced 0.8 percent yesterday. Ten-year Treasury yields fell one basis point to 3.1 percent today.

Greek Prime Minister George Papandreou clinched enough votes yesterday to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt-laden nation.

--Editors: Jonathan Annells, Nicholas Reynolds

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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