Japan 30-Year Bonds Fall for 5th Day Before This Week’s Auction

Japan’s 30-year bonds dropped for a fifth day on speculation the nation’s improving economy will curtail demand at a 700 billion yen ($8.63 billion) auction of the securities this week.

Benchmark 10-year yields climbed to a two-month high after a government report showed wages unexpectedly increased in May. Debt also declined after the resignation of a minister damaged the administration of Prime Minister Naoto Kan, adding to concern his efforts to restrain spending will fail. The Finance Ministry sold 2 trillion yen of 10-year debt today.

“The drop in 30-year bonds comes in part from the improvement in the domestic economy,” said Akitsugu Bandou, a senior economist in Tokyo at Okasan Securities Co., one of the 24 primary dealers obliged to bid at government debt sales. “Everybody in the market feels if confidence in Japan falters, we can’t keep these low bond yields,” he said, referring to the political situation.

The 30-year yield rose 2.5 basis points to 2.07 percent as of 3:26 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 2.2 percent security due March 2041 slipped 0.474 yen to 102.390 yen.

Ten-year yields gained one basis point to 1.17 percent, the highest level since May 6. Ten-year futures for September delivery lost 0.13 to 140.78 at the 3 p.m. close of the Tokyo Stock Exchange.

Wages including overtime and bonuses climbed 1.1 percent from a year earlier to 271,621 yen, the Labor Ministry said today in Tokyo. Economists surveyed by Bloomberg News forecast a 0.6 percent decline.

Disaster reconstruction minister Ryu Matsumoto submitted his resignation today after publicly scolding the governor of a region devastated by the March 11 earthquake and tsunami.

Matsumoto’s departure may complicate Kan’s aim of passing three bills before carrying out a pledge to step down.

Today’s sale of 10-year bonds drew bids valued at 3.24 times the amount on offer, compared with a so-called bid-to-cover ratio of 2.70 last month. The government will sell 30-year bonds on July 7.

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