Japan’s Bonds Set for Biggest Gain in 5 Months as Stocks Decline

Japan’s 10-year bonds headed for their biggest gain in five months after a slide in stocks increased demand for the relative safety of government debt.

Benchmark yields dropped to as low as 0.65 percent, the least in almost three weeks, after Treasury yields declined for the past two days as lower-than-forecast employment data out of the U.S. weakened the case for the Federal Reserve to end its asset buying program this year. Japan’s bonds rose after the Bank of Japan bought 900 billion yen ($8.7 billion) of debt from the market today in its fourth operation this month.

“Buying is prevailing in the bond market amid the decline in stocks,” said Daisuke Uno, the Tokyo-based chief strategist at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-largest financial group by market value. “The Fed may hesitate to keep tapering this month.”

Japan’s benchmark 10-year yield slid 4 1/2 basis points to 0.65 percent as of 3:42 p.m. in Tokyo, according to Japan Bond Trading Co. That would be the biggest drop on a closing basis since Aug. 5. A basis point is 0.01 percentage point.

The five-year yield declined 2 basis points to 0.195 percent, after touching 0.19 percent, the least since Dec. 12. The 20-year yield dropped 3 basis points to 1.505 percent.

The Nikkei 225 Stock Average lost 3.1 percent.

To contact the reporter on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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