March 7 (Bloomberg) -- Japanese 10-year bonds halted a six- day slide as yields near a four-month high enticed some investors amid expectations the central bank will keep interest rates near zero this year.

Bank of Japan Governor Toshihiko Fukui, speaking yesterday in Basel, Switzerland, said the central bank will maintain current policy until consumer prices start to rise. A government report showed capital spending grew less than expected, damping expectations the economy will rebound from a recession.

``Yields rose to an attractive level for buyers, given the view any economic recovery will be moderate,'' said Shinji Hiramatsu, a fund manager in Tokyo who helps oversee the equivalent of about $6.69 billion at Sompo Japan Asset Management Co.

The 1.5 percent bond due in March 2015 rose 0.130 to 99.956 as of the 11:05 a.m. morning close at Japan Bond Trading Co. in Tokyo. Its yield fell 1.5 basis points to 1.505 percent. Ten-year yields reached 1.535 percent on March 4, the highest for a benchmark bond since Nov. 9.

Hiramatsu said he is keeping the average duration of his debt holdings longer than that of his benchmark, the Nomura Bond Performance Index. Duration measures sensitivity to changes in interest rates, and the higher an investment's duration, the more it returns when yields decline.

Sompo Japan Asset Management is a unit of Sompo Japan Insurance Inc., the nation's third-largest casualty insurer.

Ten-year bond futures for March delivery rose 0.15 to 138.13 as of the morning close at the Tokyo Stock Exchange.

Fifth Weekly Decline

Ten-year bonds last week had a fifth weekly decline, the longest since April, as investors interpreted comments by Fukui on Feb. 28 as a signal yields are too low.

Capital spending, including investment in software, rose 3.5 percent in the fourth quarter from a year earlier, the Ministry of Finance said in Tokyo. The gain was the smallest since the third quarter of 2003 and was less than the 10.8 percent median increase forecast by four economists surveyed by Bloomberg News.

The Bank of Japan in March 2001 pushed overnight loan rates between banks to near zero percent by raising its target for reserves available to lenders. Nationwide consumer prices excluding fresh food fell 0.3 percent in January from a year- earlier level and have risen only once since April 1998.

Demand for government securities may wane among some investors after the Nikkei 225 Stock Average rose for an eighth day, heading for its longest winning streak in more than five years.

Nikkei Climbs

The Nikkei climbed as much as 0.9 percent to 11,975.46. Exporters such as Canon Inc. and Honda Motor Co. led the gains after the Standard & Poor's 500 Index on March 4 surged to its highest close since July 2001, following a government report showing faster job creation.

``Investors may find it difficult to buy bonds as the Nikkei is looking fairly solid, testing a break of 12,000,'' said Hiroaki Takai, who helps oversee the equivalent of about $7.6 billion at Sumitomo Mitsui Asset Management Co. in Tokyo.

Takai said he may wait until 10-year yields climb above 1.55 percent before buying. Sumitomo Mitsui Asset is partly owned by Sumitomo Life Insurance Co. and Mitsui Mutual Life Insurance Co., the nation's fourth and fifth largest life insurers.

Exports account for a 10th of the Japanese economy. Honda, which gets as much as 90 percent of its operating profit from North America, gained 0.4 percent, and Canon Inc., which derives 70 percent of its revenue from overseas sales, rose 0.5 percent.

U.S. Growth

The U.S. economy added 262,000 jobs last month, the most since October, the Labor Department said on March 4 in Washington. The median estimate of 70 economists surveyed by Bloomberg News was for an increase of 225,000.

U.S. 10-year Treasury notes on March 4 rose the most in a month as an increase in the unemployment rate overshadowed the payrolls figure. Average hourly earnings, an inflation gauge, were unchanged.

``The advance in U.S. Treasuries may help Japanese bonds,'' said Makoto Yamashita, an Tokyo-based economic strategist at UFJ Tsubasa Securities Co., one of the 26 primary dealers invited to discuss bond sales with the Ministry of Finance. ``Investors are likely to see yields at the 1.5 percent level as a place to buy.'' Ten-year yields may fall to 1.49 percent today, he said.

The extra yield U.S. 10-year notes offer versus their Japanese counterparts was 2.84 percentage points. The average for the past year is 2.76 percentage points.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net.

Last Updated: March 6, 2005 22:23 EST