Japanese Bonds May Decline






Japanese bonds may fall, paring this week's advance, as concern about the nation's fiscal health and gains in U.S. shares curb demand for government debt.

Ten-year yields are likely to climb from near the lowest level since March after Fitch Ratings said yesterday the nation's swelling debt burden may put pressure on its sovereign AA- rating. Concern about Japan's financial health may ease when the government releases its fiscal rehabilitation plan in June, Finance Minister Naoto Kan said after Fitch's announcement.

"Bonds will be bearish, influenced by U.S. markets," said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., a unit of New York-based Citigroup Inc. Ten- year yields may climb to 1.33 percent today, he said.

Bond futures for June delivery lost 0.11 to 139.23 as of 9:01 a.m. at the Tokyo Stock Exchange.

The benchmark 10-year note hasn't traded yet today at Japan Bond Trading Co., the nation's largest interdealer debt broker. The yield on the 1.4 percent security due March 2020 fell 1.5 basis points to 1.315 percent yesterday. Yields, which reached 1.305 percent on April 19, the lowest since March 11, are down 2.5 basis points this week.

Japan's finances have come under scrutiny since January, when Standard and Poor's cut the outlook of the nation's AA rating to "negative" from "stable." Prime Minister Yukio Hatoyama will unveil a fiscal plan in June.

"Such concerns will probably ease once the fiscal framework is announced as scheduled," Kan told reporters in Washington yesterday before a meeting of finance ministers and central bankers from the Group of Seven nations.

Treasuries slid yesterday after U.S. initial claims for unemployment benefits fell. A report next week is estimated by economists to show that Japan's jobless rate declined to 4.8 percent last month, the lowest since March 2009.