Japan's Bonds Advance for Second Day as Export Growth Slows, Stocks Fall

Japan’s longer-maturity bonds rose for a second day as a government report showed export growth slowed to the least this year, adding to evidence the economic recovery is losing momentum.

Thirty-year debt led gains as the yen strengthened to a 15- year high against the dollar and Japanese stocks dropped. The Bank of Japan, which holds a policy meeting this week, may have to ease monetary policy further if the Federal Reserve engages in further quantitative easing to boost growth, adding to the dollar’s decline.

“Slowdown signs in Asian economies are affecting Japan,” said Tatsushi Shikano, a senior economist in Tokyo at Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan’s largest bank. “Yields remain under downward pressure.”

The yield on the 30-year bond fell two basis points to 1.925 percent as of 3:32 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 2 percent security due in September 2040 rose 0.384 yen to 101.423 yen.

Twenty-year yields dropped 1.5 basis points to 1.745 percent. Ten-year yields climbed half a basis point to 0.895 percent.

Ten-year bond futures for December delivery dropped 0.04 to 143.42 at the afternoon close at the Tokyo Stock Exchange. The Nikkei 225 Stock Average fell 0.3 percent.

“Investors maintain a strong appetite to buy cash bonds on dips,” Kazuhiko Sano, chief strategist at Tokai Tokyo Securities Co., wrote today in a note to clients.

Exports Slow

Exports increased 14.4 percent in September from a year earlier, after growing 15.8 percent the previous month, the Finance Ministry said today in Tokyo. From a month earlier, shipments fell a seasonally adjusted 0.1 percent.

The yen rose as high as 80.66 per dollar today, the strongest since April 1995 when its climbed to a post-World War II low of 79.75.

All 15 economists surveyed by Bloomberg say the central bank will refrain from any action at its Oct. 28 gathering after unexpectedly cutting interest rates on Oct. 5 and creating a 5 trillion-yen fund ($61.9 billion) to purchase assets including corporate bonds, exchange-traded funds and real-estate investment trusts.

The Ministry of Finance will sell 2.6 trillion yen of two- year notes on Oct. 27. The previous two-year sale in September drew bids for 5.75 times the amount on offer, compared with a so-called bid-to-cover ratio of 4.75 at the August auction.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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