Bloomberg News

Japan 10-Year Yield Falls to 17-Month Low on Haven Demand

April 16, 2012

Japan’s bonds rose, sending the benchmark 10-year yield to a 17-month low as Asian stocks fell amid concern the European debt crisis is spreading, boosting demand for the relative safety of government debt.

Bonds also advanced as Bank of Japan (8301) Masaaki Shirakawa said today the central bank is doing its best to overcome deflation, spurring speculation that the BOJ will ease policy further at a meeting later this month. The Ministry of Finance is set to auction 2.5 trillion yen ($31 billion) of five-year notes tomorrow.

“There is a flight-to-quality bid in JGBs as we’re seeing a decline in stocks,” said Hidenori Suezawa, Tokyo-based chief strategist at Nikko Cordial Securities Inc, one of the 25 primary dealers obliged to bid at government debt sales.

The yield on the 10-year notes fell one basis point, or 0.01 percentage point, to 0.93 percent as of 4:12 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1 percent security due March 2022 rose 0.09 yen to 100.64 yen. The yield was the lowest since Nov. 5, 2010.

Ten-year bond futures for June delivery gained 0.10 to 142.69 at the 3 p.m. close of the Tokyo Stock Exchange.

The MSCI Asia Pacific Index of shares lost 0.9 percent today before Spain sells 12-month and 18-month bills tomorrow, followed by auctions of debt due in 2014 and 2022 on April 19. Yields (GSPG10YR) on the nation’s 10-year notes soared as much as 18 basis points to 6 percent on April 13, edging toward the 7 percent level that pushed Greece, Ireland and Portugal into rescues.

The BOJ set an inflation goal of 1 percent in February, when it also boosted planned bond purchases by 10 trillion yen. At their next meeting on April 27, BOJ board members will review their current price outlook of 0.5 percent inflation for the fiscal year starting in April 2013.

“I don’t see any problem at tomorrow’s five-year auction because there are expectations for further easing by the BOJ,” said Tadashi Matsukawa, who oversees the equivalent of $1.7 billion as head of fixed-income securities at Tokyo-based PineBridge Investments Japan Co. “That will add to demand from cash-rich banks.”

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net.

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


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