Japan’s Bond Futures Rise as Stock Losses Boost Safety Demand
Japan’s bond futures rose as local stocks extended losses in U.S. equities, boosting demand for the relative safety of debt.
U.S. stocks fell on BP Plc’s failure to plug a leaking oil rig in the Gulf of Mexico and a report that said Lebanon fired on Israeli warplanes. Japan’s bonds may also advance on prospects 10-year yields at the highest level in more than a week will boost demand. NHK television reported Prime Minister Yukio Hatoyama will resign.
“Bonds will remain sensitive to external risk factors,” said Akio Kato, team leader of Japanese debt at Kokusai Asset Management Co. in Tokyo, which runs the $38.7 billion Global Sovereign Open fund. “As risk aversion lingers in markets, investors are buying JGBs.”
Ten-year bond futures for June delivery gained 0.08 to 140.51 at the Tokyo Stock Exchange as of 10:01 a.m. local time.
The yield on the 1.3 percent bond due June 2020 held at 1.275 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The yield was the highest since May 20. A basis point is 0.01 percentage point.
Ten-year yields may fall to 1.2 percent by the end of this month, according to Kokusai’s Kato. Should his forecast prove accurate, investors who buy the securities today will make a 0.7 percent return, Bloomberg calculations show.
The Nikkei 225 Stock Average fell 0.7 percent and the broader Topix index declined 0.8 percent. The Standard & Poor’s 500 Index dropped 1.7 percent after Agence France-Presse reported that a senior Israeli security official said the nation’s planes were targeted by Lebanese anti-aircraft guns.
The yen weakened after NHK Television reported, without saying where it got the information, that Hatoyama told leaders of the ruling Democratic Party of Japan that he will resign.
“Political uncertainty is deepening,” Shinji Nomura, chief debt strategist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest banking group, wrote in a note today. “Investors are beginning to recognize immediate risks such as a delay in policy making, which should cap demand for bonds.”
