Japanese Bonds Fall for Third Day as Stocks Advance Before Output Report
Japanese bonds dropped, sending 10- year yields to the biggest decline in almost two years, as a pledge by the Federal Reserve to safeguard the U.S. economic recovery spurred gains in higher-yielding assets.
Bonds pared a monthly advance after Federal Reserve Chairman Ben S. Bernanke said last week the central bank “will do all that it can” to ensure a recovery. The decline in debt was tempered after the Bank of Japan’s steps to expand lending fell short of some analysts’ expectations.
“People in the stock and currency markets were a bit disappointed with the BOJ’s easing measure,” said Makoto Noji, a senior market analyst at Tokyo-based Mizuho Securities Co. “With the central bank showing a stance to maintain the accommodative environment, short- to medium-term yields are expected to stabilize, spurring purchases of bond futures.”
The yield on the benchmark 10-year bond rose three basis points to 1.025 percent as of 3:04 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 1.1 percent security due June 2020 fell 0.270 yen to 100.667 yen. The yield earlier rose as much as 11 basis points, the most since Oct. 14, 2008.
Ten-year bond futures for September delivery dropped 0.1 to 142.45 at the 3 p.m. close of the Tokyo Stock Exchange after losing as much as 0.15. The Nikkei 225 Stock Average advanced 1.8 percent.
The Federal Reserve “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary,” Bernanke said on Aug. 27 at the Kansas City Fed’s annual monetary symposium in Jackson Hole, Wyoming.
‘Received Message’
“The market received a message from Bernanke that he will back the economic recovery,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo.
The U.S. was Japan’s second-biggest export market by the value of products shipped during the first half of 2010, according to Japan’s Ministry of Finance.
Bonds trimmed losses after the Bank of Japan stepped up its monetary stimulus program by saying it would boost the amount of funds in its bank-loan program by 10 trillion yen ($117 billion) to a total of 30 trillion yen.
Stocks pared gains and the yen erased losses after the BOJ released details of the plan.
“The BOJ may need to offer surprises, such as increases in outright purchases of government debt, to bring a definite end to the yen’s advance,” said Daisaku Ueno, president at Tokyo- based Gaitame.com Research Institute Ltd.
Japanese bonds due in 10 years or longer have handed investors a return of 1 percent this month, according to an index compiled by Bank of America Merrill Lynch.
To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Nobuyuki Akama in Tokyo at akam@bloomberg.net.
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