Japan’s Government Bonds Advance as Extra Budget Avoids New Bond Issuance

April 22, 2011

By Yoshiaki Nohara -The Bloomberg

Japan’s bond futures rose to a three-week high as Prime Minister Naoto Kan compiled a 4 trillion yen ($49 billion) extra budget without new bond issuances.

Ten-year yields reached the lowest in four weeks on prospects the first spending package for rebuilding from last month’s record earthquake may not worsen the nation’s debt burden. Benchmark bonds headed for a second weekly gain after Economy and Fiscal Policy MinisterKaoru Yosano said on April 20 that taxes must be used to help fund the recovery.

“People are finding it favorable that policy makers are at least talking about tax increase and trying to respect” fiscal discipline, said Shinichi Horikawa, who helps to manage the equivalent of $12 billion at Mitsui Sumitomo Kirameki Life Insurance Co. “Investors are inclined to buy toward month- end.”

Ten-year bond futures for June delivery rose 0.19 to 139.77 at 9:21 a.m. at the Tokyo Stock Exchange. They touched 139.80, the highest since March 31.

The yield on the 1.3 percent bond due March 2021 fell 1.5 basis points to 1.21 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.133 yen to 100.795 yen. The yield was the lowest since March 25. A basis point is 0.01 percentage point.

The budget will be financed by using 2.5 trillion yen from pension funds and money originally intended to increase payments to families with children, according to a statement released in Tokyo today. It won’t increase an earlier plan for 44.3 trillion yen in new bond issuances this fiscal year.

Bonds also advanced as the yen climbed to a three-week high against the dollar and local stocks declined, boosting demand for the relative safety of debt.

To read more, visit: http://www.bloomberg.com/news/2011-04-21/japan-s-bonds-may-rise-for-fifth-day-as-yen-strengthens-to-three-week-high.html


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