Nov. 16 (Bloomberg) -- Japanese bonds may fall for the first time in a week after a government report showed the world’s second-largest economy grew at a faster pace than economists forecast.

Demand for debt is set to wane as the Cabinet Office said gross domestic product rose an annualized 4.8 percent in the third quarter, following a revised 2.7 percent expansion in the three months ended June 30. Economists expected a 2.9 percent expansion. Ten-year yields are likely to climb from near the lowest level in more than three weeks on concern last week’s 11 basis point drop in rates was excessive.

“Yields are likely to rise,” said Jun Ishii, a fixed- income strategist at Mitsubishi UFJ Securities Co. in Tokyo and Japan’s top-rated debt analyst, according to the Nikkei Veritas newspaper. Ten-year yields may reach 1.37 percent today, he said.

Ten-year bond futures for December delivery fell 0.11 to 138.77 as of 9:07 a.m. at the Tokyo Stock Exchange.

The benchmark 10-year bond hasn’t traded yet today at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The yield on the 1.4 percent bond due in September 2019 fell three basis points to 1.34 percent on Nov. 13.

The government is spending more than 20 trillion yen ($223 billion) to spur economic growth, expanding debt toward 200 percent of the nation’s GDP.

“Many market participants are still concerned about supply,” said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., a unit of New York-based Citigroup Inc. “Bonds will fall today.”

Finance Minister Hirohisa Fujii said Nov. 13 that today’s GDP report will be “one of the important factors” in deciding whether to compile an extra spending plan in the year ending March 2010.

The government may need to sell more bonds in the current fiscal year because tax revenue could fall below 40 trillion yen, Vice Finance Minister Yoshihiko Noda said last month.

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

Last Updated: November 15, 2009 19:19 EST