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Japan Bonds Rise on Concern Europe’s Economy Set for Recession

Dec. 5 (Bloomberg) -- Japan’s bonds rose, pushing down 10-year yields from a four-month high, as concern Europe is headed for a recession supported demand for refuge assets.

Benchmark bond futures advanced for a fourth day before data tomorrow forecast to show Europe’s economic growth stalled in the third quarter. Treasuries gained in New York on Dec. 2, breaking a five-day losing streak.

“The odds for a European recession are more than 50 percent,” said Takeshi Minami, the Tokyo-based chief economist at Norinchukin Research Institute Co. “Demand for Japan’s bonds as a safe asset is likely to increase further.”

Japan’s benchmark 10-year yield fell three basis points to 1.045 percent at 3:09 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.1 percent security due December 2021 added 0.272 yen to 100.497 yen. The rate touched 1.09 percent on Dec. 1, the highest since July 29.

Twenty-year yields dropped 2 1/2 basis points to 1.775 percent. Ten-year bond futures for December delivery gained 0.09 to 142.17 at the 3 p.m. close of the Tokyo Stock Exchange.

An estimate of Europe’s gross domestic product will show it grew 0.2 percent in the third quarter, the same pace as the second quarter, according to the median forecast of economists in a Bloomberg News survey before the report.

Growth of factory orders in Germany, Europe’s biggest economy, slowed to 1.9 percent in October from 2.4 percent the previous month, a separate survey showed before the data are released tomorrow.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.

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

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