Japan’s 30-Year Yields Fall to 7-Month Low Amid BOJ Speculation

Japan’s 30-year bond yields slid to a seven-month low after government data showed the nation’s consumer prices fell for a third month, fanning speculation the central bank will buy longer-maturity debt to end deflation.

The benchmark 10-year yield dropped to the least in almost a decade ahead of an auction of the bonds next week. Hearings for nominees for the next Bank of Japan governor and deputies will be held on March 4-5, Tsutomu Sato, the acting chairman of the ruling Liberal Democratic Party’s parliamentary affairs committee, told reporters in Tokyo.

“There are expectations that the BOJ will buy longer-term debt,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which manages about $163 billion in assets. “The BOJ’s credibility is on trial” as a deflation fighter.

The current 30-year yield slid as much as six basis points to 1.75 percent, the lowest since July, and was at 1.765 percent as of 10:59 a.m. in Tokyo. The 1.9 percent security due September 2042 added 0.889 yen to 102.621, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker.

The 20-year yield fell 3 1/2 basis points to 1.57 percent after touching 1.555 percent, a level unseen since July. The benchmark 10-year yield reached 0.64 percent, the least since June 2003. A basis point is 0.01 percentage point.

Ten-year bond futures for March delivery gained 0.07 to 145.09. Lead contracts rose to a record 145.26 on Dec. 7.

Consumer prices excluding fresh food fell 0.2 percent in January from a year earlier, government figures showed today. The so-called core inflation rate has decreased an average of 0.2 percent every month over the past decade.

Prime Minister Shinzo Abe nominated Asian Development Bank President Haruhiko Kuroda yesterday as the next BOJ chief and economics professor Kikuo Iwata and BOJ official Hiroshi Nakaso as deputies. Kuroda advocated an inflation target more than a decade ago, and said last month that additional easing can be justified for 2013.

The Ministry of Finance will auction as much as 2.4 trillion yen ($26 billion) of 10-year bonds on March 5.

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