Japan’s Bonds Fall as Stocks Gain Following Fed’s Added Stimulus

Japan’s bonds declined as the Federal Reserve’s decision to expand asset purchases sent stocks prices higher, sapping demand for the relative safety of government securities.

Yields on the benchmark 10-year notes rose to the highest level in two weeks following losses in U.S. Treasuries after the American central bank took the unprecedented step yesterday of linking stimulus measures to unemployment and inflation. Japan’s Ministry of Finance sold five-year notes today.

“There is selling in JGBs,” 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. “Investors are following the correction in Treasuries after the Fed meeting.”

The yield on the benchmark 10-year note gained 3 basis points, or 0.03 percentage point, to 0.725 percent as of 3:13 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The rate was the highest since Nov. 28.

The 20-year rate rose 3 1/2 basis points to 1.695 percent, matching the highest level since Oct. 31, while the yield on 30- year bonds added 41/2 basis points to 1.940 percent.

Japan’s benchmark Nikkei 225 Stock Average climbed 1.7 percent today. U.S. Treasuries fell for a third day, pushing the 10-year yield to 1.72 percent, the most since Nov. 7.

The Federal Open Market Committee said yesterday it will buy $45 billion a month of Treasury securities starting in January to spur the economy. Interest rates will stay low “at least as long” as unemployment remains above 6.5 percent and if inflation is projected to be no more than 2.5 percent, the central bank also said in a statement. The thresholds replace the Fed’s earlier view that rates would stay near zero at least through the middle of 2015.

A sale of 5-year Japanese government debt today saw bids worth 3.54 times the 2.5 trillion yen ($29.9 billion) of securities on offer today, compared with the so-called bid-to- cover ratio of 4.96 in the last sale in November.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Yumi Ikeda in Tokyo at yikeda4@bloomberg.net

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

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