Japan Government Bonds Rise, Pushing 5-Year Yield to Record Low

Japan’s bonds rose, pushing five-year yields to a record low, after prospective Bank of Japan governor Haruhiko Kuroda said he would consider starting the central bank’s open-ended asset purchases sooner.

Benchmark 30-year bond yields slid to a 2 1/2-year low after Kuroda said the BOJ should acquire longer-dated bonds and there’s no need for it to limit buying to three-year maturities. Five-year rates dropped to 0.095 percent, falling below the rate the BOJ pays to financial companies on excess reserves. The Ministry of Finance will sell as much as 2.4 trillion yen ($26 billion) of 10-year bonds tomorrow.

“There is still some more room for yields to decline,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of $19 billion in Tokyo. “Expectations are mounting that the BOJ will step up monetary easing and increase purchases of government bonds.”

The yield on the benchmark 10-year note fell 4 1/2 basis points to 0.60 percent at 4:45 p.m. in Tokyo from last week, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 0.8 percent security maturing in December 2022 advanced 0.422 yen to 101.849. The yield was the lowest since June 2003 and its decline was the biggest since July 2011. Benchmark debt rose for an eighth day, the longest rally since Dec. 24, 2008.

Five-year rates declined two basis points to 0.095 percent. Thirty-year yields fell nine basis points to 1.675 percent, a level unseen since August 2010. Twenty-year yields dropped as much as eight basis points to 1.49 percent, the least since August 2003. A basis point is 0.01 percentage point.

Ten-year bond futures for March delivery climbed 0.27 to 145.32, the highest for a lead contract.

Kuroda Hearing

Kuroda said that the central bank will do whatever is needed to end 15 years of deflation should he be confirmed as governor and indicated that open-ended asset purchases could start sooner than next year.

“I would like to make my stance clear that we will do whatever we can do,” Kuroda, the president of the Asian Development Bank, said at a confirmation hearing in the parliament in Tokyo today. The central bank hasn’t bought enough assets and should buy longer-term bonds, he said.

Prime Minister Shinzo Abe’s nomination of Kuroda has spurred forecasts for more aggressive easing after Masaaki Shirakawa exits the job on March 19. The opposition Democratic Party of Japan, the largest party in the upper house, has signaled it will back Kuroda, easing his passage through a split Parliament.

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