Bonds post monthly advance on Greek debt crisis, deflation

Tokyo : Japanese bonds completed the biggest monthly gain since November as chronic deflation and Greece's debt crisis boosted demand for government securities.

Benchmark bonds finished a third weekly gain as reports Saturday showed consumer prices slid for a 13th month and the jobless rate rose, backing the Bank of Japan's decision to keep borrowing costs near zero. Ten-year yields fell to the lowest since December last week after Standard & Poor's cut Greece's debt rating to junk and reduced rankings for Portugal and Spain.

"As investors are building long positions, the bond market is more sensitive to bond-positive news," said Kenro Kawano, a debt strategist in Tokyo at Credit Suisse Group AG, Switzerland's second-biggest bank. "The bull bond market will continue for a while."

The yield on the 1.4 per cent bond due March 2020 fell 11.5 basis points last month to 1.28 per cent at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 1.007 yen in April to 101.050 yen. The yield fell to 1.28 per cent on Friday, matching the lowest since December 30. Ten-year bond futures for June delivery gained 1.46 Per cent last month to 139.68 at the Tokyo Stock Exchange. Financial markets were shut on April 29 for a national holiday and will be closed again for three days starting today.

Japanese government bonds handed investors a return of 0.83 per cent in April, the largest gain since a 0.84 per cent gain in Nov-ember.

Consumer prices excluding fresh food slid 1.2 per cent last month from a year earlier.