Japan’s Bonds May Rise on Buffett; Stocks to Test 26-Year Low
March 10 (Bloomberg) -- Japan’s 10-year bonds may rise, pushing yields down
from close to a one-month high, on speculation the Nikkei 225 Stock Average
will slump to the lowest in 26 years, boosting demand for debt as a refuge.
The securities may advance for the second time in three days as Nikkei 225
futures slid in Chicago after Billionaire Warren Buffett said the U.S. economy
“has fallen off a cliff.” Demand for government securities may also increase as
European finance ministers resist doing more to boost their economies, fanning
concern of increased corporate losses and failures.
“There’s a high possibility of the Nikkei 225 breaking October’s lows” to reach
the lowest since 1982, said Kazuhiko Sano, chief strategist in Tokyo at Nikko
Citigroup Ltd. There is a possibility that “bonds will rise.”
Ten-year bond futures for March delivery traded at 138.70 in London from 138.74
at the 3 p.m. close at the Tokyo Stock Exchange yesterday. Contracts for June
delivery were at 138.80 in London from 138.78. Bond futures will open for
trading at 9 a.m. Tokyo time.
The benchmark 10-year bond hasn’t traded yet today at Japan Bond Trading Co.,
the nation’s largest interdealer debt broker. The yield on the 1.3 percent bond
due in March 2019 was unchanged at 1.29 percent yesterday.
Nikkei 225 futures traded at 6,975 in Chicago from 7,050 in Osaka yesterday
after Buffett told CNBC that efforts to stimulate a recovery may lead to an
inflation rate higher than those in the 1970s. The Standard & Poor’s 500 Index
fell 1 percent yesterday, extending the worst weekly slump since November.
European finance ministers are resisting doing more to boost their economies
even as the World Bank forecasts the biggest global recession since World War
II.
Resisting Aid
“We take the view that we don’t need to make a further effort,” Luxembourg
Finance Minister Jean-Claude Juncker told reporters after leading a meeting of
euro-area finance chiefs in Brussels yesterday. Germany’s Peer Steinbrueck said
his government is “not discussing any additional measures” to boost Europe’s
largest economy.
Demand for inflation-linked bonds may increase after the Nikkei English News
said that Japan plans to guarantee the principal on inflation-linked government
bonds as early as next fiscal year.
The appeal of the securities may increase, “especially given that the Ministry
of Finance and the Bank of Japan are purchasing the debt,” said Akihiko Inoue,
an analyst at Mizuho Investors Securities Co. in Tokyo.
The yield on Japan’s 10-year inflation-indexed debt fell about three basis
points yesterday to 3.77 percent, or 2.48 percentage points greater than
similar-dated conventional bonds, according to data compiled by Bloomberg. A
basis point is 0.01 percentage point.
The 1.3 percent bond due in December 2018 closed at 100.08 to yield 1.29
percent yesterday, according to the Bloomberg Yen Bond Fixing Price. The level
is an average rate set at 6:30 p.m. in Tokyo by Daiwa Securities SMBC Co.,
Nikko Citigroup Ltd., Mizuho Securities Co. and Mitsubishi UFJ Securities Co
