Japan’s Bonds Decline for First Time in Week on Production Report, Stocks

Japan’s government bonds fell for the first time in a week after a report showed factory output increased, tempering concern the economy is slowing.

Benchmark 10-year yields also climbed from the lowest level in seven months as advancing Asian stocks sapped demand for the relative safety of government debt. Treasuries slid yesterday on lower-than-expected demand at an auction of five-year notes.

“We forecast bond yields will gradually rise this year,” said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co., one of the 24 primary dealers obliged to bid at government debt sales. “Momentum for the domestic economy is going to turn upward.”

Ten-year yields added 2.5 basis points to 1.115 percent as of 3:10 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.2 percent security due June 2021 lost 0.227 yen to 100.762 yen. The rate fell to 1.085 percent yesterday, the lowest since Nov. 22.

Ten-year bond futures for September delivery declined 0.26 to 141.34 at the 3 p.m. close of the Tokyo Stock Exchange. The MSCI Asia Pacific Index of regional shares advanced 1.3 percent.

Industrial production gained for a second month, rising 5.7 percent in May from April, the Trade Ministry said today. Economists surveyed by Bloomberg estimated a 5.5 percent gain.

Five-year Treasury yields climbed 13 basis points yesterday after an auction of the notes drew a yield of 1.615 percent, exceeding the average forecast of 1.580 percent in a Bloomberg survey of nine primary dealers.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.

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

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