Japanese government bonds rose, pushing benchmark yields to the lowest level since July 2003, as concern deepened that Europe’s debt crisis is worsening.
The Bank of Japan’s so-called Rinban operation saw a shortfall of offers to sell for first time since 2006, highlighting demand for government debt. Fitch Ratings cut Greece’s long-term credit ranking to CCC from B- and rising borrowing costs in Spain spurred speculation the region’s crisis is spreading. Ten-year U.S. Treasury yields were four basis points from the record low.
“There are many favorable factors for bonds,” such as falling stocks and higher yen, said Takafumi Yamawaki, chief rates strategist in Tokyo at JPMorgan Chase & Co., one of the 25 primary dealers obliged to bid at government debt sales. “Investors have no choice but to buy JGBs.”
The yield on the 10-year security slid three basis points to 0.815 percent as of 12:30 p.m. in Tokyo, according to data compiled by Bloomberg. Twenty-year rates declined 4 1/2 basis points to 1.57 percent and five-year yields dropped two basis points to 0.215 percent, the lowest since October 2010.
Ten-year bond futures for June delivery rose 0.31 to 143.56 in Tokyo, after touching 143.63, the most for a so-called lead contract since Oct. 21, 2010.
Japan’s Topix Index of shares sank 2.5 percent, wiping out its gain in 2012, while the yen traded at 79.44 per dollar. The currency reached 79.14 yesterday, the highest since Feb. 17.
The BOJ accepted 174.7 billion yen ($2.2 billion) in offers to sell debt with less than one year to maturity, below the central bank’s target to buy 310 billion yen in the securities. A separate asset-purchase fund of the BOJ saw a shortfall of offers to sell on May 16, the first time since the program began in October 2010.
Japan Post Insurance Co., the nation’s biggest life insurer, plans to cut purchases of domestic government debt by 40 percent this fiscal year and buy more municipal and corporate bonds.
The unit of Japan Post Holdings Co., which has about 93 trillion yen in assets, will reduce investments in Japanese government bonds by 2.1 trillion yen to 3.1 trillion yen from the year that ended in March, said Mitsuya Watanabe, general manager at the investment planning department in Tokyo.
Purchases of municipal bonds and corporate debt will increase by 90 billion yen to 1.84 trillion yen, while buying of overseas debt, mainly U.S. Treasuries, will rise fourfold to 200 billion yen, according to Watanabe.