Nov. 5 (Bloomberg) -- Japan's five-year government notes fell for a second day, the longest losing streak in three weeks, as a gain in Asian stocks reduced demand for debt.

Five-year yields climbed by the most in a week as a rise in commodity prices bolstered Japanese resource companies and a decline in money-market rates encouraged investors to seek higher-yielding assets. The Ministry of Finance today will sell 1.9 trillion yen ($19 billion) in 10-year bonds with a 1.5 percent coupon.

``The market is looking at the equity market and whether the recent recovery will be sustained,'' said Susumu Kato, chief economist in Tokyo at Calyon Securities, one of the 24 primary dealers required to bid at government debt sales. ``This is weighing on the short-end of the market.''

The yield on the 1.2 percent note due September 2013 rose 1.5 basis points to 0.885 percent as of the 11:05 a.m. morning close in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.074 yen to 101.467 yen. A basis point is 0.01 percentage point.

Ten-year bond futures for December delivery were little changed at 137.86 at the Tokyo Stock Exchange.

The Nikkei 225 Stock Average added 2.8 percent, rising for a second day, after crude oil for December delivery climbed 10 percent to $70.53 a barrel in New York yesterday, the biggest one-day gain since Sept. 22.

The prior sale of 10-year securities drew bids worth 2.58 times the amount on offer, compared with a so-called bid-to-cover ratio of 2.66 at the September sale. Last year's average ratio was 3.05. The ministry will announce the auction results at 12:45 p.m. local time.

Money-Market Rates

The three-month London interbank offered rate, or Libor, that banks charge each other for dollars, slid 15 basis points yesterday to 2.71 percent, the lowest since June, according to the British Bankers' Association. The Tokyo equivalent for yen, or Tibor, fell by almost 10 basis points to 0.79 percent, according to the Japanese Bankers Association.

The Bank of Japan drained 600 billion yen from the financial system today. Japan's overnight call loan rate was at 0.29 percent in Tokyo, according to broker Tokyo Tanshi Co. The BOJ's target rate is 0.30 percent.

Demand for notes also waned on speculation the government will issue additional debt to fund a fiscal stimulus package. Japan's Prime Minister Taro Aso on Oct. 30 promised to pump 5 trillion yen into the economy to help households and small businesses.

Fiscal Stimulus

Parliament approved a 1.8 trillion yen supplementary budget to fund a first stimulus package on Oct. 16.

``In this condition, where we are worried about less liquidity, higher risk premium and higher government spending, it's more negative'' for bonds, said Hitomi Kimura, a bond strategist in Tokyo at JPMorgan Securities Japan Co., another primary dealer.

Japan's 20-year bonds yielded 128 basis points more than those on five-year notes yesterday, the most since April, according to data compiled by Bloomberg.

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

Last Updated: November 4, 2008 21:44 EST