Bonds fall in Japan on signs of exports fostering growth

Aug 2 | Updated: Aug 3 2005, 05:30am hrs
Japans 10-year bonds fell, driving the yield to the highest in almost four months, after reports suggested a recovery in the worlds second-largest economy will be supported by growth in exports and consumer spending.

The securities declined for the sixth day in seven after a US manufacturing index rose more than economists expected and a Japanese government report yesterday showed wages had the biggest gain in seven months. Finance minister Sadakazu Tanigaki said indicators show Japans economy is picking up.

Bond yields are set for a rise, said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co, the eighth-largest Japanese life insurer. The yield on the benchmark 1.2% bond due in June 2015 rose 1.5 basis points, to 1.36%. The price fell 0.128, or 128 yen per 100,000 yen face amount, to 98.607 yen. Its yield earlier climbed to 1.38%, the highest for 10-year bonds since April 6.

Ten-year yields may advance to 1.7% by the end of December, Mr Sakurai said. The US Institute for Supply Managements manufacturing index was 56.6 in July, up from 53.8 in June. The US is Japans biggest trading partner. An index above 50 indicates expansion.

The US is the biggest destination for Japans exports, which accounted for a third of growth last year.

Bloomberg