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Source: www.asiaecon.org |

JAPANESE BONDS RISE AMIDST GLOBAL RECESSION


After demand increased at the 500 billion yen ($5 billion) auction of 30-year debt, Japan's 10-year bonds rose for the first time in two days. On speculation of a drop in U.S. retail sales and slow global growth, the increased demand for bonds sent 10-year yields to the lowest in more than a week.   This was the first offering of bonds since Finance Minister Kaoru Yosano announced more than 10 trillion yen in debt may be needed to help fund Prime Minister Taro Aso's record economic stimulus package.


After demand increased at the 500 billion yen ($5 billion) auction of 30-year debt, Japan’s 10-year bonds rose for the first time in two days. On speculation of a drop in U.S. retail sales and slow global growth, the increased demand for bonds sent 10-year yields to the lowest in more than a week.

This was the first offering of bonds since Finance Minister Kaoru Yosano announced more than 10 trillion yen in debt may be needed to help fund Prime Minister Taro Aso’s record economic stimulus package.

Bids were nearly 3.82 times the amount on offer, compared to a ratio of 2.5 at last month’s sale.

Yasunori Murai, a Tokyo-based market analyst at Shinko Securities Co., one of the 24 primary dealers who must bid at government sales said, “It was a good auction, especially given the fact that this was the first sale after the announcement of new stimulus measures”. She continued, “the auction also confirmed decent demand for long-term debt”.

The yield on the 1.3 percent bond due March 2019 fell two basis points to 1.445 percent in Tokyo, while the price rose from 0.171 to 98.741 yen.

“We have seen euphoria-driven capital inflows into riskier assets recently”, said Akira Takei, Tokyo-based general manager of the international fixed-income investment department of Mizuho Asset Management Co. “As reality bites and concerns about growth prospects resurface, bonds may rise again”.

Japan’s government may forecast the country’s gross domestic product will contract as much as 3 percent for the year beginning April 1. Experts believe that the bleak sign of recovery is what kept bond yields low.

“While some of the recent data in Japan and the U.S. signaled some signs of a bottoming0out, this does not mean that a meaningful recovery is ahead”, said Toshiro Yanagiya, general manager of the securities division at Aozora Bank, “A bleak outlook for the global economy will support bonds”.

Gains in bonds, however, may be limited by concerns debt sales will keep rising as Prime Minister Taro Aso seeks to spend his way out of a recession.

Chief strategist in Tokyo at Barcalys Capital Japan Ltd. Voiced concerns. “The launch of new bonds can technically ease the strain on existing bonds”, Chotaro Morita said. “Still the anxiety about supply may linger until we get full details for additional debt sales”.

In lieu of the growing demand for safe assets, Nomura holdings, Japan’s biggest brokerage, has applied to issue $4 billion in bonds over the next two years. By April 22, 2011, London-based Nomura Global Funding Plc has applied to issue 400 billion yen in bonds.

The Ministry of Finance has also stated that it planned to boost bond sales, specifically, by 7 trillion yen to 111.3 trillion yen in the financial year that ends on March 31, 2010.

People are increasing there savings, while decreasing consumption on goods. Consumers are straying away from consumption and moving towards the safety in bonds.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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