Japan Bond Futures Reach Year’s High After Kan Survives No-Confidence Vote
Japan’s government bond futures rose to the highest since December as the lower house of parliament today rejected a motion of no confidence in Prime Minister Naoto Kan, easing concern about political instability. Prior to the vote, Kan signaled he’ll resign once a solution to the nation’s post-earthquake crisis is in sight. Ten-year yields fell the most in about four weeks after Treasuries advanced yesterday and before a U.S. report forecast to show hiring slowed in May. “As the political uncertainty eased, bonds were bought, but that may not last for long,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “U.S. yields and fundamentals are more important” factors to the market. Ten-year bond futures for June delivery gained 0.51 to 141.05 as of the afternoon close at the Tokyo Stock Exchange. The contracts touched 141.18 earlier, the highest since Dec. 7. The yield on the 1.2 percent bond due June 2021 declined four basis points to 1.14 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. That’s the biggest yield drop since May 6. A basis point is 0.01 percentage point. The Nikkei 225 (NKY) Stock Average retreated 1.7 percent. Treasury 10-year yields fell 12 basis points to 2.94 percent yesterday.
U.S. Cooling Signs
U.S. companies added 38,000 workers to payrolls, the fewest since September, ADP Employer Services reported yesterday. U.S. firms added 170,000 workers in May after hiring 244,000 people in April, according to the median estimate of economists in a Bloomberg News survey before Labor Department figures tomorrow. “The global economic slowdown is causing bonds to be bought,” said Satoshi Yamada, who helps oversee about $12.6 billion as manager of fixed-income trading at Okasan Asset Management Co. in Tokyo. Ministry of Finance data today showed that Japanese companies increased spending at a slower pace as the nation’s record earthquake and ensuing tsunami knocked out power and shut down factories. Capital spending excluding software rose 4.2 percent in the three months ended March 31 from a year earlier, after increasing 4.8 percent in the previous quarter, the ministry said. From the previous quarter, outlays fell 0.2 percent.
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