Japan’s 10-Year Yields May Decline to Record: Technical Analysis

Japan’s 10-year bond yields may decline to the record low of 0.43 percent set in June 2003, Sumitomo Mitsui Banking Corp. said, citing trading patterns.

Benchmark rates will probably extend their slide within a so-called downward trend channel, according to Daisuke Uno, Tokyo-based chief strategist at the unit of Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second-largest bank by market value. The bottom line of the channel connects the lows of 1.215 percent reached in March 2008 and 0.82 percent in October 2010.

“The next support target level will be around 0.43 to 0.44 percent based on the extended lower line of the downward trend channel,” Uno said.

The yield on the benchmark 10-year note fell to as low as 0.585 percent yesterday, the least since June 2003, before climbing four basis points to 0.645 percent from the previous day’s close, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker.

In technical analysis, analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index. A trend channel is formed by two parallel lines connecting highs and lows. Support is an area where prices may change direction.

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