Dec. 16 (Bloomberg) -- Japan’s 10-year bonds fell for a fourth day, the longest losing streak in five weeks, before a report that economists say will show U.S. housing starts increased for the first time in three months. Benchmark yields touched a seven-month high after better- than-estimated U.S. reports on industrial production and consumer prices boosted U.S. Treasury rates yesterday. Futures sank toward the lowest level since April after a government report showed overseas investors sold more Japanese debt than they bought last week. “The U.S. slowdown doesn’t look that serious,” said Masaru Hamasaki, who helps oversee about $17 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “Japan surely benefits from the resilience of the U.S. economy through exports, which can be a cause of higher bond yields.” The yield on the benchmark 10-year bond rose 1.5 basis points to 1.27 percent as of 4:35 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 1.2 percent bond due in December 2020 fell 0.132 yen to 99.379. The four-day stretch of yield gains is the longest since the five days ended Nov. 11. The yield earlier touched 1.295 percent, matching the highest level since May 18. A basis point is 0.01 percentage point. Ten-year bond futures for March delivery dipped 0.04 to 138.91 at the 3 p.m. close of the Tokyo Stock Exchange. They sank to 138.16 yesterday, the lowest level for a lead contract since April 7. U.S. housing starts rose to a 550,000 annual rate in November from 519,000 the previous month, according to the median estimate of economists in a Bloomberg News survey before the Commerce Department releases the data today. Overseas Investors Ten-year Treasury yields touched 3.56 percent yesterday, the highest since May 13, before falling to 3.48 percent today. The yield spread between 10-year Treasuries and Japanese debt has averaged 2.03 percentage points for the past year, data compiled by Bloomberg show. Output at U.S. factories, mines and utilities rose 0.4 percent last month, the biggest gain since July, the Federal Reserve said yesterday. The Labor Department said consumer prices excluding food and energy gained 0.8 percent in November from a year earlier after an advance of 0.6 percent in October. “If U.S. 10-year yields stay in the 3 percent range, the equivalent yields in Japan are unlikely to fall below 1.2 percent, though Japanese bonds have been sold excessively from the viewpoint of economic fundamentals and the central bank’s policy,” Akihiko Inoue, chief strategist in Tokyo at Mizuho Investors Securities Co., wrote in a note to clients today. Net Foreign Selling Foreign investors sold 417.3 billion yen ($4.95 billion) more Japanese bonds than they bought during the week ended Dec. 10, the biggest net sales since the period ended Oct. 8, according to Ministry of Finance data released today. The decline in bonds was limited amid concern the nation’s economic recovery will falter. The Bank of Japan’s quarterly Tankan report yesterday showed a gauge of sentiment among Japan’s largest manufacturers is expected to deteriorate in March. “Economic numbers are peaking out,” said Daisuke Uno, chief strategist at Tokyo-based Sumitomo Mitsui Banking Corp., Japan’s No. 2 lender with deposits of $850 billion. “Ten-year yields in the range of between 1.2 and 1.3 percent are too high, so I’m expecting them to come down.” --With reporting by Yumi Ikeda in Tokyo. Editors: Jonathan Annells, Nicholas Reynolds. To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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