BLBG: Japan's Bonds Advance as European Debt Concerns Increase Demand for Refuge
Japan’s government bonds advanced, pushing down 10-year yields from a three-month high, as concern Europe’s debt crisis will spread caused investors to seek the refuge of the Asian nation’s securities.
Bond futures advanced after the Wall Street Journal said European policy makers are planning a more rigorous round of “stress tests” for banks. Bonds also gained after Bank of Japan board member Miyako Suda today said the chance that deflation will end in Japan in the fiscal year starting April 2011 isn’t high. The government sold 10-year bonds today.
“It will take a strong consensus among European nations to eliminate investor concerns about the region’s debt markets,” said Satoshi Yamada, who helps oversee $11 billion as a manager of fixed-income trading at Okasan Asset Management Co. in Tokyo. “People are turning to safer assets like JGBs and U.S. bonds.”
The yield on the 1 percent bond due September 2020 fell 4.5 basis points to 1.14 percent as of 1:40 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.391 to 98.767 yen.
Ten-year yields earlier reached 1.195 percent, matching the highest since Sept. 6. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery gained 0.58 to 141.45 at the Tokyo Stock Exchange.
Concern that Europe’s debt crisis will worsen has shifted to Portugal and Spain since Nov. 28, when the region’s governments gave Ireland an 85 billion-euro ($110.3 billion) rescue package. Standard & Poor’s said it may cut Portugal’s credit ratings on concern the government has made little progress on boosting economic growth to offset the fiscal drag from scheduled 2011 budgetary cuts.
Auction Results
Gains in bonds were limited as the 10-year auction drew less demand than some traders forecast.
“The auction ended weaker than I had expected,” said Satoshi Yamada, chief quantitative analyst in Tokyo at Nikko Cordial Securities Inc. “But bonds are being supported as people buy them on dips with yields around 1.2 percent.”
The lowest price at the auction was 100.01 yen, below the 100.10 median forecast of 14 traders in a Bloomberg News survey. The sale drew bids worth 2.41 times the amount on offer, down from a so-called bid-to-cover ratio of 3.91 times at the previous auction in November.
To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
