Bloomberg News

Japan Bonds Gain as Yen Record, Stock Losses Spur Refuge Demand

October 26, 2011

Oct. 26 (Bloomberg) -- Japan’s bonds gained as the yen’s surge to a post-World War II record versus the dollar yesterday pushed down stocks and spurred demand for the refuge of debt.

Benchmark 10-year yields were within three basis points from the lowest level since November on speculation European leaders will struggle to agree on a solution to the region’s debt crisis at a summit today. Demand at an auction of two-year notes rose to a three-month high after the Nikkei newspaper reported that Bank of Japan policy makers will discuss expanding monetary easing at a policy meeting tomorrow.

“Risk-averse moves are intensifying ahead of the European summit,” which is supporting debt, said Atsushi Ito, a Tokyo- based senior rate strategist at UBS AG. “The media report on possible additional easing from the BOJ led to bond buying.”

Ten-year yields fell 2.5 basis points to 0.99 percent as of 3:10 p.m. Tokyo time at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1 percent securities maturing in September 2021 rose 0.225 yen to 100.09 yen.

Ten-year bond futures for December delivery advanced 0.36 to 142.66 at the 3 p.m. close of the Tokyo Stock Exchange. The Nikkei 225 Stock Average declined 0.2 percent.

BOJ measures to mitigate the impact of the strong yen on the Japanese economy may include expanding a 50 trillion yen ($658 billion) asset purchase program by 5 trillion yen and purchasing bonds with maturities longer than two years, the Nikkei reported without citing anyone.

The Ministry of Finance set a 0.2 percent coupon on 2.6 trillion yen of two-year notes at today’s auction. The bid-to- cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, rose to 4.07 from 3.29 at last month’s sale.

--Editors: Nate Hosoda, Rocky Swift

To contact the reporter on this story: Monami Yui in Tokyo at; Yumi Ikeda in Tokyo at

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

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