By Theresa Barraclough March 8 (Bloomberg) -- Japan’s 10-year bonds fell for the first time in three days as signs the global recovery is gaining momentum damped demand for the safety of government debt. Ten-year bond futures dropped from the highest level this year after a government report showed Japan posted a larger- than-expected current-account surplus in January, signaling overseas consumption is buoying the economy. Demand for bonds also waned as stocks advanced following a U.S. report last week that showed the world’s biggest economy lost fewer jobs than economists forecast. “The better U.S. employment data is a factor weighing on bond prices,” said Masaru Hamasaki, chief strategist at Tokyo- based Toyota Asset Management Co., which oversees the equivalent of $14 billion. The yield on the 1.4 percent bond due March 2020 rose one basis point to 1.315 percent as of 4:36 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.089 yen to 100.750. Ten-year bond futures for March delivery dropped 0.07 to 140.12 at the afternoon close on the Tokyo Stock Exchange. They climbed to 140.27 on March 5, the highest since Dec. 22. The Nikkei 225 Stock Average rose 2.1 percent to close t 10,585.92 and the yen weakened against all but one of the 16 major currencies. ‘Hard to Buy’ “The advance of the Nikkei to above 10,500 and the weak yen makes it hard to buy bonds,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank. Japan posted a current-account surplus of 899.8 billion yen ($9.95 billion) for January, the Ministry of Finance said in Tokyo. The surplus was forecast to be 783.9 billion yen, according to a Bloomberg News survey. Exports grew at the fastest pace in more than 30 years in January and industrial production rose the most since May, reports showed last month. Ten-year U.S. Treasury yields climbed eight basis points to 3.68 percent on March 5 after the Labor Department said payrolls dropped by 36,000 last month, less than the 68,000 decline predicted by economists. The yield rose three basis points today to 3.71 percent. The extra yield offered by 10-year Treasuries over similar- maturity Japanese debt expanded to 2.39 percentage points today, the widest since Feb. 22. ‘Snapback’ in Yields “The JGB market is likely to react to the snapback in U.S. yields following last Friday’s stronger-than-expected U.S. employment data,” Chotaro Morita, head of fixed-income strategy research at Barclays Capital in Tokyo, wrote in a research note. Thirty-year yields climbed before the Ministry of Finance sells 600 billion yen of the securities tomorrow. The bond due September 2039 added half a basis point to 2.325 percent today. That suggests the ministry will set a 2.3 percent coupon on the new debt, compared with 2.2 percent at the previous auction last month. “The 30-year auction tomorrow is weighing on the longer end,” said RuiXue Xu, a rates strategist in Tokyo at RBS Securities Japan Ltd. “The auction will go smoothly.” To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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