Japan's Negative-Yield Bonds Return More Than Double Treasuries

  • Japan bonds gain 5.8% in six months, versus for 2.2% for U.S.
  • Fed officals suggest they're closer to raising interest rates

Negative yields are proving to be no deterrent to investors in Japan’s bonds.

The nation’s government debt has returned 5.8 percent in the past six months, the most of 26 sovereign debt markets tracked by Bloomberg. Treasuries gained 2.2 percent. Trading in U.S. government securities is scheduled to close at 2 p.m. New York time and stay shut worldwide for the Good Friday holiday, according to the Securities Industry and Financial Markets Association.

Japanese bonds due in as much as a decade yield less than zero, leading investors in the nation to hoard longer securities that offer more attractive payments. Bank of Japan Governor Haruhiko Kuroda has said he won’t hesitate to increase the record monetary stimulus that’s pushing yields down, while Federal Reserve officials suggest they’re moving closer to raising U.S. interest rates.

“For people who think they have to buy in a high-yield country, this is a mistake for the time being,” said Hideo Shimomura, the chief fund investor at Mitsubishi UFJ Kokusai Asset Management in Tokyo, which oversees about $106 billion. “It’s not a conventional period.” Over the coming years, higher-yielding countries will probably outperform their peers, he said.

Bonds were little changed in Asian trading, with Japan’s 10-year security yielding negative 0.10 percent and same-maturities Treasuries at 1.89 percent as of 12:58 p.m. in Tokyo.

In addition to the Good Friday market close, trading is scheduled to stop at 3 p.m. in Japan Monday and stay shut in London. The market will open as usual Monday in the U.S.

With the BOJ buying unprecedented amounts of debt and using negative interest rates, Kuroda reiterated this month he’ll do more if needed.

Fed Bank of St. Louis President James Bullard said Wednesday policy makers should consider raising interest rates at their next meeting in April. Fed Bank of Philadelphia President Patrick Harker said this week the U.S. economy is resilient, and he’d support a quarter-point increase if that continues. Bullard votes on monetary policy this year while Harker doesn’t.

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