Japan’s Government Bonds Rise on Concerns Over U.S. Growth, Greece Debt

Japan’s bond futures rose, touching a 10-week high, on concerns the U.S. economic recovery is slowing and the International Monetary Fund will withhold aid for Greece.

Benchmark 10-year yields fell toward a six-month low before U.S. data forecast to show business activity grew at a slower pace in May. Jean-Claude Juncker, who leads the group of euro- area finance ministers, said on May 26 that the IMF may withhold aid for Greece as questions mount about how the country can avoid default next year.

“The U.S. economy is showing weakness as people had expected, which is having a big impact” on bonds, said Takafumi Yamawaki, chief rate strategist at JPMorgan Chase & Co. in Tokyo. “I expect yields to continue to stay low.”

Ten-year bond futures for June delivery gained 0.06 to 140.88 at the Tokyo Stock Exchange this week. The contracts reached 141.00 yesterday, the highest since March 15.

The yield on the 1.1 percent bond due March 2021 fell to 1.12 percent this week in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker.

The yield touched 1.105 percent on May 16, the lowest since Nov. 24. A basis point is 0.01 percentage point.

The Institute for Supply Management-Chicago Inc. is forecast to say its business barometer dropped to 63.0 in May from 67.6 in April, according to economists surveyed by Bloomberg News before the data due May 31. Figures greater than 50 signal expansion.

Reports on May 26 showed consumer spending cooled in the first quarter more than previously estimated, while initial jobs claims rose 10,000 to 424,000 in the week ended May 21, when economists had estimated they would decline.

Bonds maintained gains even after Japan’s statistics bureau reported yesterday consumer prices excluding fresh food rose 0.6 percent in April from a year earlier. That’s the first increase since December 2008.

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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