Tokyo: Japan's bonds fell the most since April last week as signs the US economy is recovering damped demand for the relative safety of government debt.
Twenty-year bonds dropped for the sixth week and 10-year yields rose to the highest level in almost two months before a US government report that economists had hoped in vain would show a 23-month run of job losses ended in December. Bonds also dropped as local stocks gained and 10-year Treasury yields increased, rising to 3.85 per cent.
"Bonds are in a negative environment before the US jobs data," said Shinji Kunibe, a Tokyo-based senior investor at JPMorgan Asset Management Japan Ltd., a unit of the second-largest US bank by assets. "Strong employment data could push up Treasury yields beyond 4 per cent. This outlook should impact Japan's bonds."
Japan's 10-year yields last week rose 7.5 basis points to 1.36 per cent, the highest since November 13, in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The 1.3 per cent bond due Dec-ember 2019 fell 0.657 yen to 99.475.
Twenty-year yields gained five basis points to 2.15 per cent last week, the most since October. Ten-year bond futures for March delivery declined 0.98 to 138.72 on the Tokyo Stock Exchange.
US payrolls would be unchanged in December after falling 11,000 in the previous month, according to the median estimate of economists in a Bloomberg survey before the Labour Department released the report Friday.
The yield premium of 10-year US notes over Japanese bonds reached 2.54 percentage points on Dec-ember 31, the highest in two years. The difference was about 2.5 percentage points Friday.
Bonds also fell last week as the yen dropped to a four-month low of 93.77 versus the dollar Friday, boosting the outlook for local exporters.
The Nikkei 225 Stock Average advanced 1.1 per cent Friday.
