Japan Yields Drop to Lowest Since 2003 on Growth Concern

Japanese government bonds advanced, pushing benchmark yields to the lowest level since June 2003, as concern that the U.S. economic recovery is losing momentum bolstered demand for the relative safety of government debt.

Yields on benchmark 10-year securities fell as domestic stocks tumbled for a fourth day, following a report last week that showed the U.S. unemployment rate unexpectedly rose. Japan’s Ministry of Finance is scheduled to sell 2.3 trillion yen ($29.4 billion) in 10-year notes tomorrow.

“There are increasing safety bids into bonds across the world after U.S. payroll numbers came in weaker than expected,” said Hidenori Suezawa, Tokyo-based chief strategist at Nikko Cordial Securities Inc, one of the 25 primary dealers obliged to bid at government debt sales. “I see Japan’s 10-year yield falling to around 0.78 percent today.”

The 10-year rate slid half a basis point, or 0.005 percentage point, to 0.8 percent as of 10:52 a.m. in Tokyo, according to data compiled by Bloomberg. It earlier touched 0.79 percent, the least since June 2003 when the rate dropped to a record low 0.43 percent.

Twenty-year rates declined as much as 2 1/2 basis points to 1.59 percent. Ten-year bond futures for June delivery climbed as much as 0.39 to 144.21 in Tokyo, rising above 144 for the first time since Oct. 14, 2010.

Japan’s Topix index of shares lost 2.1 percent, heading for the lowest close since December 1983. Should the gauge close at the current level, it will have fallen more than 20 percent from this year’s high on March 27, entering a so-called bear market.

The U.S. jobless rate climbed to 8.2 percent in May, according to the monthly government jobs report released on June 1. Economists surveyed by Bloomberg had expected it to remain unchanged at 8.1 percent. The U.S. added 69,000 workers to payrolls last month, less than the most pessimistic forecast in a separate Bloomberg survey. The median projection was a 150,000 gain.

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