Japan Bond Sales to Rise at Slower Pace in 2011, Tokai, MUFJ Say

Japan’s bond sales may increase at a slower pace next fiscal year, easing concern supply will outstrip demand, according to Tokai Tokyo Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co.

Bond and note sales will likely grow by 3.6 trillion yen ($43 billion), or about 2.5 percent, in the year starting April 2011, according to the companies, which are among the 24 primary dealers obliged to bid at government debt sales.

The Ministry of Finance will hold meetings with primary dealers today and institutional investors tomorrow to discuss the size of debt issuances for fiscal 2011. The government said in its initial plan released last December that it would boost bond sales to investors such as banks and life insurers to a record 144.3 trillion yen in the current fiscal year, an increase of 31 trillion yen from the prior year.

“If bond sales increase by just several trillion yen next fiscal year, the market will judge that the impact will be limited,” said Jun Ishii, chief fixed-income strategist at Mitsubishi UFJ Morgan Stanley in Tokyo.

The ministry will use the meetings with primary dealers and institutional investors to gauge how much debt will be absorbed by the market, said Kazuhiko Sano, chief strategist at Tokai Tokyo Securities. The market’s baseline will be an increase of 3.6 trillion yen, and a rise of 6 trillion yen or 7 trillion yen will upset the supply-demand balance, he said.

The government will likely boost issuances of two-year, five-year, 30-year and 40-year securities in fiscal 2011, according to Mitsubishi UFJ’s Ishii and Eiji Dohke, Tokyo-based chief strategist for Japanese debt at Citigroup Inc.

Planned monthly debt issuance for the current fiscal year was 2.6 trillion yen and 2.4 trillion yen for two-year and five-year maturities respectively, and 600 billion yen and 300 billion yen for 30-year and 40-year maturities.

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