Bond Investors Said Japan Linker Resumption Premature, MOF Says

Most investors said it is premature to immediately resume sales of inflation-indexed bonds because they don’t expect enough demand from domestic investors, according to Ministry of Finance officials.

The majority of institutional investors said they aren’t considering buying the so-called linkers, the ministry officials told reporters in Tokyo today. Some primary dealers, those obliged to bid at the government auctions, suggested the resumption of sales should be delayed until the second half the fiscal year ending March 2014, according to the officials, who spoke on condition of anonymity because of ministry policy.

A few dealers said there is some interest for linkers from overseas investors, the official said. The ministry stopped offering the notes in August 2008 because of falling demand amid deflation.

Some participants saw scope for increasing issuance of 2-year notes and 30-year bonds in the fiscal year starting April, while others said there’s room to further expand debt offering for 5- and 10-year securities, according to the Ministry officials.

The government said on Jan. 15 it will sell 2.7 trillion yen of 5-year notes per month in February and March, an increase of 200 billion yen each month, and sell 2.4 trillion yen in 10-year bonds in the two months, an increase of 100 billion yen each month.

Japan’s benchmark 10-year bond yield fell half a basis point, or 0.005 percentage point, to close at 0.73 percent today, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker.

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