Japan’s 2-Year Yields Drop to Lowest Since 2002 on BOJ Change

Japan’s two-year notes advanced, pushing yields to the lowest in more than a decade, amid speculation the central bank will expand monetary easing after a new governor is appointed.

Rates on five-year notes matched levels unseen since the Ministry of Finance started issuing the debt in February 2000, after Bank of Japan Governor Masaaki Shirakawa announced on Feb. 5 that he will step down on March 19, almost three weeks before his term is due to end. Benchmark 10-year debt advanced for a third day as stocks in Tokyo declined, increasing demand for the relative safety of government securities.

“Two- and five-year notes are leading the market with their strength,” said Takafumi Yamawaki, Tokyo-based chief rates strategist at JPMorgan Chase & Co., one of the 24 primary dealers obliged to bid at Japan’s debt sales. “There are expectations for monetary easing by the Bank of Japan.”

The yield on the two-year note fell 1 1/2 basis points to 0.03 percent as of 11 a.m. in Tokyo from yesterday, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 0.1 percent security maturing in February 2015 advanced 0.03 yen to 100.139. It was the lowest yield for a two-year note since September 2002. Five-year rates dropped a 1/2 basis point to 0.14 percent.

Benchmark 10-year rates declined 1 1/2 basis points to 0.76 percent. A basis point is 0.01 percentage point.

Ten-year bond futures for March delivery gained 0.13 to 144.14 in Tokyo. The Nikkei 225 Stock Average of shares fell 0.6 percent.

To contact the reporter on this story: 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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