Japan 10-Year Bond Yield Falls to 2003 Low on Easing Bets

Japan’s bonds rose, sending 10-year and 20-year yields to the lowest in almost a decade, amid speculation Bank of Japan (8301) Governor Haruhiko Kuroda will use parliament testimony tomorrow to outline new easing steps.

The extra yield investors demand to hold 10-year bonds instead of 3-year notes narrowed to the least since June 2003 on prospects the BOJ will buy longer-dated securities. At his inaugural press conference as BOJ chief last week, Kuroda reiterated a pledge to achieve a 2 percent price target. The 30- year yield dropped to a 2 1/2-year low.

“There are expectations in the market that the BOJ will eventually buy super long bonds in additional easing,” said Satoshi Yamada, a Tokyo-based manager of debt trading at Okasan Asset Management Co., which manages the equivalent of $12 billion. “Japan’s bond yields are falling despite stock gains globally and losses in bonds overseas.”

The yield on the benchmark 10-year note touched 0.55 percent, the lowest since June 2003, before trading unchanged at 0.555 percent as of 3:30 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The all-time low for the 10-year rate is 0.43 percent, also reached in June 2003.

The 20-year rate fell 4 1/2 basis points, or 0.045 percentage point, to 1.44 percent, after earlier touching 1.43 percent, the least since July 2003. Yields on 30-year bonds dropped six basis point to 1.55 percent, a level unseen since August 2010.

‘Decisive’ Easing

Kuroda will appear in parliament tomorrow to speak about monetary policy. He said on March 21 he was confident that “decisive monetary easing” would lead to 2 percent inflation, adding that the nation’s biggest task is to end deflation.

The BOJ currently buys government bonds with maturities of up to three years through its 76 trillion-yen ($802 billion) asset-purchase program.

Kikuo Iwata, one of two new deputy governors at the BOJ, told reporters last week the bank should commit to achieving price goals within two years. Consumer prices excluding fresh food probably declined 0.4 percent in February from a year earlier, according to the median estimate of economists surveyed by Bloomberg News. The statistics bureau releases data on March 29.

Japan’s leading bond futures on Japan’s bonds slid as domestic stocks rallied after Cyprus agreed to the outlines of an international bailout. The Nikkei 225 Stock Average jumped 1.7 percent, rallying from a 2.4 percent slide on March 22.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Nobuyuki Akama in Tokyo at akam@bloomberg.net

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

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