Wednesday, February 4, 2009
Japanâs Bonds Complete Biggest Drop in a Month as Stocks Rise
Japanâs 10-year bonds completed their biggest decline in a month after rising Asian stocks reduced demand for government debt.
Bonds slid for a fifth day, the longest losing streak since July 2007, after U.S. shares rallied yesterday when Treasury Secretary Timothy Geithner said the government will step up efforts to fight the recession. Demand for debt also waned after the Bank of Japan said yesterday it will start buying equities owned by financial institutions to shore up their capital.
âThe bond market is likely to test lower prices after overseas stocks rose,â said Akihiko Inoue, an analyst at Mizuho Investors Securities Co. in Tokyo, the brokerage arm of Japanâs second-largest bank by revenue.
The yield on the 1.3 percent bond due December 2018 rose five basis points to 1.345 percent as of 4 p.m. in Tokyo at Japan Bond Trading Co., the nationâs largest interdealer debt broker. The price fell 0.435 yen to 99.608 yen. The yield touched 1.35 percent, the highest level since Dec. 16. A basis point is 0.01 percentage point.
Ten-year bond futures for March delivery slid 0.40 to 138.35 at the afternoon close at the Tokyo Stock Exchange as the Nikkei 225 Stock Average advanced 2.7 percent.
The Standard & Poorâs 500 Index snapped a three-day drop yesterday after Geithner told the Wall Street Journal that White House fiscal policy is âabout to get very aggressiveâ as President Obamaâs economic team prepares to address the deepening recession.
Japanâs government bonds handed investors a loss of 0.3 percent last week, according to indexes compiled by Merrill Lynch & Co. The Nikkei gained 3.2 percent last week.
âBearish Conditionsâ
âBearish conditions will continue,â said Masaru Hamasaki, a Tokyo-based senior strategist at Toyota Asset Management Co., which oversees about $3.3 billion. âThe Bank of Japanâs stock purchase plan is, if anything, negative for bonds.â
The central bank said yesterday it will buy 1 trillion yen ($11.2 billion) of stocks by April 2010, resuming a program it ended more than four years ago.
âThis measure aims to act as a safety net to stabilize the financial markets,â BOJ Governor Masaaki Shirakawa said yesterday at a press briefing. âItâs always appropriate to prepare for the worst factors and the worst-case scenario.â
The Bank of Japan has cut interest rates to 0.1 percent and is buying corporate debt from lenders to encourage them to extend credit and prevent a deeper recession. The bank said two weeks ago it will purchase as much as 3 trillion yen of commercial paper and consider purchasing corporate bonds to channel funds to companies.
Shrinking Economy
The decline in bonds was tempered on speculation a government report this month will show the economy contracted for a third quarter, luring investors to the safety of debt.
The worldâs second-biggest economy probably shrank 4.05 percent in the three months ended Dec. 31 from the previous quarter, according to economists surveyed by Bloomberg News before the Feb. 16 report.
âItâs quite positive for bonds and in the intermediate to long-term, sentiment will remain bullish,â said Keiko Onogi, a Tokyo-based debt strategist at Daiwa Securities SMBC Co., one of the 24 primary dealers that are required to bid at government debt sales.
Ten-year yields may decline to 1.17 percent by the end of March, according to a Bloomberg survey of economists and analysts. The estimate puts a heavier weighting on more recent forecasts. Should those predictions prove accurate investors who bought the securities today would make a return of 1.7 percent, Bloomberg calculations show.
Bonds still fell on concern the government will boost bond sales further to help fund spending to combat the recession.
The government may need to issue a record 40.6 trillion yen of new debt in the fiscal year starting April 2011, according to official calculations from the Ministry of Finance.
Source:- Bloomberg
Bonds slid for a fifth day, the longest losing streak since July 2007, after U.S. shares rallied yesterday when Treasury Secretary Timothy Geithner said the government will step up efforts to fight the recession. Demand for debt also waned after the Bank of Japan said yesterday it will start buying equities owned by financial institutions to shore up their capital.
âThe bond market is likely to test lower prices after overseas stocks rose,â said Akihiko Inoue, an analyst at Mizuho Investors Securities Co. in Tokyo, the brokerage arm of Japanâs second-largest bank by revenue.
The yield on the 1.3 percent bond due December 2018 rose five basis points to 1.345 percent as of 4 p.m. in Tokyo at Japan Bond Trading Co., the nationâs largest interdealer debt broker. The price fell 0.435 yen to 99.608 yen. The yield touched 1.35 percent, the highest level since Dec. 16. A basis point is 0.01 percentage point.
Ten-year bond futures for March delivery slid 0.40 to 138.35 at the afternoon close at the Tokyo Stock Exchange as the Nikkei 225 Stock Average advanced 2.7 percent.
The Standard & Poorâs 500 Index snapped a three-day drop yesterday after Geithner told the Wall Street Journal that White House fiscal policy is âabout to get very aggressiveâ as President Obamaâs economic team prepares to address the deepening recession.
Japanâs government bonds handed investors a loss of 0.3 percent last week, according to indexes compiled by Merrill Lynch & Co. The Nikkei gained 3.2 percent last week.
âBearish Conditionsâ
âBearish conditions will continue,â said Masaru Hamasaki, a Tokyo-based senior strategist at Toyota Asset Management Co., which oversees about $3.3 billion. âThe Bank of Japanâs stock purchase plan is, if anything, negative for bonds.â
The central bank said yesterday it will buy 1 trillion yen ($11.2 billion) of stocks by April 2010, resuming a program it ended more than four years ago.
âThis measure aims to act as a safety net to stabilize the financial markets,â BOJ Governor Masaaki Shirakawa said yesterday at a press briefing. âItâs always appropriate to prepare for the worst factors and the worst-case scenario.â
The Bank of Japan has cut interest rates to 0.1 percent and is buying corporate debt from lenders to encourage them to extend credit and prevent a deeper recession. The bank said two weeks ago it will purchase as much as 3 trillion yen of commercial paper and consider purchasing corporate bonds to channel funds to companies.
Shrinking Economy
The decline in bonds was tempered on speculation a government report this month will show the economy contracted for a third quarter, luring investors to the safety of debt.
The worldâs second-biggest economy probably shrank 4.05 percent in the three months ended Dec. 31 from the previous quarter, according to economists surveyed by Bloomberg News before the Feb. 16 report.
âItâs quite positive for bonds and in the intermediate to long-term, sentiment will remain bullish,â said Keiko Onogi, a Tokyo-based debt strategist at Daiwa Securities SMBC Co., one of the 24 primary dealers that are required to bid at government debt sales.
Ten-year yields may decline to 1.17 percent by the end of March, according to a Bloomberg survey of economists and analysts. The estimate puts a heavier weighting on more recent forecasts. Should those predictions prove accurate investors who bought the securities today would make a return of 1.7 percent, Bloomberg calculations show.
Bonds still fell on concern the government will boost bond sales further to help fund spending to combat the recession.
The government may need to issue a record 40.6 trillion yen of new debt in the fiscal year starting April 2011, according to official calculations from the Ministry of Finance.
Source:- Bloomberg
# posted by (hris @ 6:49 AM 
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