Tokyo: Japan's bonds fell, pushing up 10- year yields from a three-week low, as the yen's decline on Friday to the lowest level in a month boosted the profit outlook for exporters and damped demand for government debt.
Japan's long-term bonds also dropped after the Federal Reserve raised its discount rate for the first time in three years as it took another step toward withdrawing its stimulus measures. Bonds also fell on speculation primary dealers will cut debt holdings before Japan sells 20-year bonds this week.
"Selling pressure should mount on bonds as the yen weakens following the Fed's action," said Tetsuya Miura, chief market analyst in Tokyo at Mizuho Securities Co., a unit of Japan's second-largest banking group.
The yield on the 2.1 per cent bond due December 2029 rose 1.5 basis points to 2.165 per cent last week at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price dropped 0.206 yen to 99.098 yen.
Ten-year bond futures for March delivery rose 0.10 over the week to 139.47 on the Tokyo Stock Exchange.
The yen fell to as low as 92.09 per dollar in Tokyo on Friday, the weakest since January 12, after the Fed raised its discount rate by a quarter point to 0.75 per cent. The central bank said the move will encourage financial institutions to rely more on money markets rather than the central bank.
"It's getting rather difficult for investors to keep buying mid-term bonds with the dollar in an uptrend," Chotaro Morita, head of fixed-income strategy research at Barclays Capital, wrote in a note to clients.
