Japan Bonds Advance in Longest Streak of Weekly Gains Since 2003

Japan’s bonds climbed in their longest streak of weekly advances since 2003 as a drop in local shares boosted demand for safer assets.

Five-year yields reached a two-month low as demand increased for the securities at a sale today. Two-year yields fell to levels last seen on April 4, the day the Bank of Japan announced unprecedented stimulus. Overnight-index swaps, which reflect investor expectations of the central bank’s benchmark rate, were near a 10-month low, signaling policy makers may fail to achieve the nation’s 2 percent inflation target.

“Investors can’t sell bonds as long as the stock market is weak,” said Takehito Yoshino, the chief fund manager at Mizuho Trust & Banking Co., a unit of Japan’s third-biggest financial group by market value. “We have seen robust demand at today’s auction.”

The benchmark five-year note’s yield retreated 1/2 basis point to 0.185 percent as of 4:02 p.m. in Tokyo, a level unseen since Dec. 4, according to Japan Bond Trading Co. The two-year yield dropped to 0.065 percent.

The 10-year yield fell one basis point to 0.59 percent, the lowest since Nov. 11, headed for a sixth week of declines that would represent the longest run of slides since May 2003.

Japanese stocks are the worst performers this year worldwide. The Topix index lost 1.3 percent today, extending its slide to 9.1 percent since the end of last year.

Strong Auction

The Ministry of Finance sold 0.2 percent five-year notes, drawing bids for 4.07 times the amount available, showing stronger demand than at the previous offering in January. The lowest accepted price exceeded the 100.05 median estimate of primary dealers surveyed by Bloomberg News.

Five-year overnight-index swaps dropped to 0.15 percent last week, the lowest since April 5, the day after policy makers announced its unprecedented bond-buying program. The measure was at 0.16 percent today, based on data compiled by Bloomberg.

Consumer-price growth will slow to an average 0.38 percent in the three years starting February 2016, from 1.3 percent in December, data on two- and five-year inflation swaps show.

Before it's here, it's on the Bloomberg Terminal.