Japan bonds gain for first time in a week as shares extend plunge

Tokyo: Japan's bonds gained for the first time in seven days as stocks extended a global equity plunge, boosting demand for the relative safety of government debt.

Ten-year yields fell from the highest level in almost three months as shares of exporters such as Canon Inc led equity losses after the yen's gain to eight-week high versus the dollar damped the outlook for exports. Long-term bonds found buyers after the yield advantage of 10-year debt over two-year notes held near its highest since May 2006.

"Stock losses and a strong yen are causing bonds to be purchased," said Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Securities Co.

"Bonds will be bought when 10-year yields approach 1.4 per cent." The yield on the 1.3 per cent bond due in December 2019 fell one basis point to 1.365 per cent at 1:43pm in Tokyo at Japan Bond Trading Co, the nation's largest interdealer debt broker. The price rose 0.087 yen to 99.435 yen (Dh4.08).

On the week, the yield gained five basis points. Five-year yields dropped 1.5 basis points to 0.525 per cent. A basis point is 0.01 percentage point.

Ten-year bond futures for March delivery gained 0.15 to 138.95 at the Tokyo Stock Exchange. The Nikkei 225 Stock Average slid 2.6 per cent. The yen climbed to 88.56 per dollar Friday, the highest since December 14. It traded at 89.64 Saturday.

The 10-year yield fell after reaching 1.38 per cent Friday, the highest level since November 12. Its spread against the two-year rate had widened to 1.22 percentage points, the most since May 2006, according to data compiled by Bloomberg. The gap was 1.21 percentage points Saturday. Gains in bonds were limited before a government report Friday on the latest trend in US unemployment.