Japan Bonds May Rise for 1st Time in Week on Bernanke Remarks
Dec. 8 (Bloomberg) -- Japan’s government bonds may risefor the first time in a week after Treasuries gained onspeculation U.S. interest rates will stay low.
The spread between 10-year debt in the U.S. and Japannarrowed from the widest level in more than three monthsafter Federal Reserve Chairman Ben S. Bernanke said the U.S.faces “significant headwinds.” Japan’s 10-year yields maydecline from a two-week high on expectations stocks will fall,snapping a six-day rally. The Ministry of Finance will sell600 billion yen ($6.7 billion) in 30-year bonds today.
“Bernanke’s remarks were good for bonds,” saidKazuhiko Sano, chief strategist in Tokyo at Citigroup GlobalMarkets Japan Inc. “Overseas market movements will bepositive for domestic debt.”
Ten-year bond futures for December delivery traded at139.90 in London from 139.91 at the 3 p.m. close at the TokyoStock Exchange yesterday. The contract will open for tradingat 9 a.m. Tokyo time.
The benchmark 10-year bond hasn’t traded yet today atJapan Bond Trading Co., the nation’s largest interdealer debtbroker. The yield on the 1.3 percent bond due in December2019 was unchanged at 1.285 percent yesterday, when itreached 1.305 percent, the highest level since Nov. 24. Ten-year yields may fall to as low as 1.27 percent today,Citigroup’s Sano said.
Ten-year Treasury yields dropped four basis points to3.43 percent, narrowing the debt’s advantage over similar-dated Japanese bonds to 2.14 percentage points, according todata compiled by Bloomberg.
U.S. ‘Headwinds’
The U.S. economy “confronts some formidable headwindsthat seem likely to keep the pace of expansion moderate,”Bernanke said yesterday. Economists expect the FederalReserve to hold off raising interest rates through the secondquarter of next year, while Japanese borrowing costs arelikely to remain near zero through 2010.
“Bernanke’s comments suggested lower interest rates fora prolonged time,” said Eiji Dohke, chief strategist inTokyo at UBS Securities Japan Ltd., one of the 23 primarydealers that are required to bid at government debt sales.“Market participants also expect the Bank of Japan tomaintain an accommodative policy for a long time, which willanchor short-term yields.”
Japan’s 10-year yields may fall to 1.26 percent today,according to Dohke.
The prior sales of 30-year securities on Oct. 8 and Aug.6 both drew bids worth 3.27 times the amount on offer,compared with an average so-called bid-to-cover ratio of 3.31times over the past year.
The 1.4 percent bond due in September 2019 closed at101.30 to yield 1.25 percent yesterday, according to theBloomberg Yen Bond Fixing Price. The level is an average rateset at 6:30 p.m. in Tokyo by Daiwa Securities SMBC Co., NikkoCitigroup Ltd., Mizuho Securities Co. and Mitsubishi UFJSecurities Co.
To contact the reporter on this story:Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
Last Updated: December 7, 2009 18:22 ESTSource: Bloomberg
