Morgan Stanley Warns of Crisis Amid Inflation Sign: Japan Credit

Morgan Stanley said inflation and overspending threaten to push Japan’s finances to the brink, amid signs government-bond investors are preparing for rising consumer prices.

An auction of inflation-linked sovereign notes yesterday drew a higher-than-expected price, as investors bid for 2.87 times the amount available. The benchmark 10-year yield on non-protected securities will probably climb to 0.84 percent by the end of 2014, delivering a 0.5 percent loss, based on analyst estimates and data compiled by Bloomberg. That would be the first negative return since 2003, according to Bank of America Merrill Lynch index data.