Treasuries Extend Weekly Gain as Japan Yields Tumble to New Lows

The ‘Big Return’ of the Fixed Income Market

Treasuries rose, headed for their biggest weekly gain in a month, as Japanese government yields slid to record lows.

Bonds are rallying globally as the U.K. vote to leave the European Union raises speculation the decision will curb economic growth. Japanese benchmark yields extended their push below zero as some economists predict the central bank will add to its record stimulus program following its next meeting July 29. All-time-low yields in Japan and Europe are driving investors to Treasuries. Taiwan’s 10-year yield dropped to a record.

“In the Tokyo market, there’s no interest rate, and there’s turmoil in the euro area,” said Yoshiyuki Suzuki, the head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which has $63.4 billion in assets. “Money is escaping to the Treasury market.”

Treasury 10-year note yields fell two basis points to 1.45 percent as of 2:15 p.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in May 2026 rose 7/32, or $2.19 per $1,000 face amount, to 101 5/8.

The Bloomberg U.S. Treasury Bond Index has risen 0.6 percent this week as of Thursday, the most since the period ended June 3.

Japan’s 10-year yield tumbled to an unprecedented minus 0.255 percent. Two- and five-year yields also set lows as the market surged.

“They’re ripping higher,” said John Gorman, the head of non-yen rates trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo. Nomura is one of the 23 primary dealers that underwrite the U.S. debt.

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