Japanese Bond Futures Rise a Third Day on Yen, Falling Consumer Sentiment

Japanese bond futures rose for a third day as the yen’s climb to a 15-year high threatened the outlook for exporters’ earnings.

Benchmark 10-year bonds extended this week’s gain after a government report showed consumer confidence declined for a second month. The government will sell 2.4 trillion yen ($29 billion) in five-year notes tomorrow.

“The yen’s appreciation is significant,” said Akira Terabayashi, a Tokyo-based researcher at Norinchukin Research Institute Co. “Ten-year yields are likely to remain in the 1.1 percent range. But it’ll be a different story if the yen continues to strengthen.”

The yield on the 10-year bond fell one basis point to 1.12 percent as of 3:08 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1 percent security due September 2020 rose 0.089 yen to 98.921. The yield has retreated 2.5 basis points this week.

Ten-year bond futures for December delivery added 0.08 to 141.86 at the 3 p.m. close of the Tokyo Stock Exchange.

The Japanese currency traded at 83.65 per dollar after appreciating to 83.35 yesterday, a level unseen since May 1995. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their local currency.

Japan’s government said it will seek discussions with China over the nation’s record purchases of Japanese bonds.

Japan is closely watching the transactions and will seek to maintain close contact with Chinese authorities on the issue, Vice Finance Minister Naoki Minezaki told lawmakers in Tokyo. Finance Minister Yoshihiko Noda suggested at the same hearing that it’s inappropriate for China to buy Japan’s bonds without a reciprocal ability for Japanese to invest in China’s market.