Japan’s 10-Year Lead Bond Futures Advance to Record Before GDP

Japan’s lead bond futures climbed to a record amid speculation the central bank will increase debt purchases to bolster growth.

Ten- and five-year securities rose, sending their yields to nine-year lows, before data next week on third-quarter gross domestic product. Bank of Japan (8301) Deputy Governor Kiyohiko Nishimura yesterday said the bank is ready to increase the provision of funds as needed. Thirty-year debt gained after demand at an auction beat the average for the past 10 sales.

“Bonds are being supported amid rising expectations for additional easing by the BOJ,” said Takafumi Yamawaki, chief rates strategist in Tokyo at JPMorgan Chase & Co., one of the 25 primary dealers obliged to bid at government debt sales.

Ten-year bond futures for December delivery climbed as much as 0.25 to 145.24, the highest level reached by the most actively traded contract on record dating back to 1985. The previous high was 145.09 set in June 2003.

The yield on the benchmark 10-year bond fell 2 1/2 basis points to 0.685 percent as of 3:20 p.m. in Tokyo, the lowest since June 2003. The 0.7 percent security due December 2022 added 0.234 yen to 100.140, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker.

The five-year yield slid 1 1/2 basis points to 0.15 percent, a level unseen since 2003.

Economy Contracted

The government will release the final reading on third- quarter GDP on Dec. 10. The world’s third-largest economy contracted an annualized 3.5 percent in the three months ended Sept. 30, the Cabinet Office said on Nov. 12.

The BOJ “has been and will always be ready to take appropriate and decisive action,” Nishimura said in a speech yesterday. The central bank, scheduled to meet on Dec. 19, aims for annual inflation of 1 percent and currently buys securities including government bonds through its 66 trillion-yen ($800 billion) program.

The 641 billion-yen auction of 30-year debt today drew bids valued at 4.08 times the amount on offer, surpassing the 10-sale average of 3.83. Yields on the securities dropped six basis points to 1.885 percent, the lowest since Sept. 27. Twenty-year rates slid as much as four basis points to 1.64 percent, matching the lowest since Sept. 26.

“There was solid demand at the 30-year sale,” said Takuma Sugawara, a senior JGB strategist at Societe Generale SA, another primary dealer. “Money is flowing into the bond market on expectations for additional monetary easing.”

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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

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