Japan Bonds Fall a Second Day as Profit Optimism, Stocks Curb Debt Demand
July 14 (Bloomberg) -- Intel Corp. Chief Financial Officer Stacy Smith talks with Bloomberg's Susan Li from Santa Clara, California, about the outlook for sales. Intel, the world's biggest chipmaker, reported record second-quarter sales and topped analysts' estimates with its forecast for this period, allaying concern that a rebound in technology spending is losing steam. Smith also discusses the company's investments in China. (Source: Bloomberg)
Japanese bonds fell for a second day after companies from Intel Corp. to Bayerische Motoren Werke AG projected higher sales, boosting stocks and curbing demand for the relative safety of government debt.
The benchmark 10-year yield rose toward a two-week high of 1.165 percent set on July 8 as the Nikkei 225 Stock Average jumped following rallies in U.S. and European shares. The Bank of Japan starts a two-day meeting today, at which economists expect it to refrain from easing monetary policy.
“When you think about the level of stocks, bonds have room to fall further,” said Akitsugu Bandou, senior economist in Tokyo at Okasan Securities Co. “I haven’t heard concern rising about a second dip in Japan’s economy.”
The yield on the benchmark 10-year bond advanced 1.5 basis points to 1.140 percent as of 3:13 p.m. at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The yield rose to as high as 1.165 percent on July 8, a level not seen since June 23.
The 1.1 percent security due June 2020 fell 0.133 yen to 99.643 yen. Ten-year bond futures for September delivery lost 0.18 to close at 141.22 at the Tokyo Stock Exchange.
Ten-year yields may rise to 1.4 percent by the end of September, according to Okasan’s Bandou. If his forecast proves accurate, investors who buy the securities today will incur a 2 percent loss, Bloomberg calculations show.
The Nikkei 225 climbed 2.7 percent today for the first gain in three days. The Standard & Poor’s 500 Index jumped 1.5 percent in New York yesterday, while the Stoxx Europe 600 Index climbed 1.9 percent.
BOJ Meeting
Intel, the world’s No. 1 computer-chip maker, surged 7 percent in extended trading after forecasting third-quarter sales that exceeded analysts’ estimates. In Germany, BMW rallied 8.3 percent after raising 2010 sales and earnings projections on increasing demand in China and the U.S.
“Robust corporate earnings are easing concern the U.S. economy will lose steam,” said Shinji Nomura, chief debt strategist at Tokyo-based Nikko Cordial Securities Inc. In 2009, the U.S. was Japan’s second-biggest export market after China, according to the finance ministry.
A government report yesterday showed confidence among Japanese households improved for a sixth-consecutive month in June. Last week, Bank of Japan Governor Masaaki Shirakawa said the economy is “likely to stay on a recovery trend” and domestic demand is poised to increase.
The central bank will keep the main interest rate at 0.1 percent and forgo fresh liquidity injections tomorrow, according to all 16 economists surveyed by Bloomberg News.
To contact the reporters on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
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