Japan's 20-Year Bonds Rise on Signs of Economic Slowdown, Falling Equities
Japan’s 20-year bonds advanced on speculation economic growth will decelerate, spurring demand for the relative safety of government debt.
Benchmark bond futures climbed toward the highest level in seven years before a report tomorrow forecast to show Japan’s industrial production grew at the slowest pace in more than a year last quarter. The Nikkei 225 Stock Average fell 0.6 percent in Tokyo after the Federal Reserve’s Beige Book business survey said growth was slowing in some areas of the U.S.
“The bond market is close to a bubble,” said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages the equivalent of $310 billion. “Everybody is scared, but there’s a game of chicken going on here.”
The yield on the 20-year bond declined 1.5 basis points to 1.76 percent as of 3:58 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.8 percent security due June 2030 gained 0.222 yen to 100.589 yen. The yield on the benchmark 10-year bond fell one basis point to 1.08 percent. A basis point is 0.01 percentage point.
Ten-year bond futures for September delivery rose 0.17 to 141.72 at the 3 p.m. close of the Tokyo Stock Exchange. Futures climbed to 142.08 on July 22, a level not seen since August 2003.
Japan’s factory output rose 0.2 percent in June from May, according to the median estimate of 26 economists surveyed by Bloomberg News before the Trade Ministry report tomorrow. That would cap the smallest quarterly gain since production fell in the first three months of 2009.
U.S. Data
Bonds also gained after the U.S. Commerce Department said yesterday orders for durable goods dropped 1 percent in June. Economists had estimated a 1 percent increase. U.S. economic growth slowed in some areas over the past two months, dragged down by commercial real estate and the expiration of a tax credit for homebuyers, the Fed said yesterday in its survey.
The U.S. was Japan’s second-biggest export market after China by the value of products shipped during the first half of 2010, according to a Ministry of Finance report.
Gains in bonds were limited as a Trade Ministry report showed Japan’s retail sales growth improved in June. 1111
Retail sales increased 3.2 percent from a year earlier, the sixth straight gain, led by demand for cars, gasoline and clothes, the Trade Ministry said. The result matched the median estimate of 14 economists surveyed by Bloomberg News.
To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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