By Yoshiaki Nohara Dec. 26 (Bloomberg) -- Japan’s 10-year bonds fell as signs of a U.S. economic recovery boosted global stocks, damping demand for the safety of debt. Ten-year yields climbed to their highest level in more than a week after Treasuries slid on Dec. 24 on a gain in U.S. durable goods orders and a drop in jobless claims. The spread between U.S. and Japanese debt expanded to the widest level in two years, making yen-denominated debt less attractive. Japan’s bonds also dropped as the Finance Ministry said the government will issue about 144 trillion yen ($1.6 trillion) of debt to the market in the year starting April 1. “Japan’s bonds are simply following Treasury moves, given there are no other strong factors,” said Koji Ochiai, a senior market economist in Tokyo at Mizuho Investors Securities Co., a unit of Japan’s second-largest bank. “The bond issuance outline should have no surprise and keep stability for next year, but fiscal concerns remain for 2011 and afterwards.” The yield on the 1.3 percent bond due December 2019 gained four basis points to 1.27 percent this week in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price dropped 0.357 yen to 100.265 yen on the week. The yield matched the highest level since Dec. 16. Ten-year bond futures for March delivery slid 0.34 this week to 139.74 at the Tokyo Stock Exchange. A basis point is 0.01 percentage point. Treasury Spread The benchmark 10-year Treasury yield touched 3.81 percent in New York on Dec. 24, the highest since Aug. 10, according to BGCantor Market Data. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average both rose 0.5 percent on Dec. 24. MSCI’s World Index gained for a fifth day. The spread between 10-year Treasury yields and the same maturity Japanese government bonds reached 253 basis points on Dec. 24, the widest gap since December 2007. “Treasury moves should weigh on Japan’s bonds even if the bond issuance outline provides stability for the market,” said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc. Japanese investors sold a net 436 billion yen in overseas debt last week, the biggest amount since October, according to a Finance Ministry report released yesterday. Bond Issuance Of Japan’s total government debt issuance next fiscal year, new bond sales will be 44.3 trillion yen, according to a budget proposal released yesterday. Bond sales to the market were projected to be 145.2 trillion yen, according to the median forecast of 15 primary dealers surveyed by Bloomberg. Losses in bonds were limited after a Japanese government report yesterday showed the jobless rate climbed to 5.2 percent from October, matching the median forecast of 26 economists surveyed by Bloomberg News. Consumer prices excluding fresh food slid 1.7 percent in November from the same month a year earlier, a separate report showed yesterday. The median estimate of 25 economists surveyed by Bloomberg News was for a 1.7 percent decline. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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