Tokyo: Japan's five-year notes rose, pushing five-year yields to the lowest level since 2003, on speculation Prime Minister Naoto Kan will lead efforts to rein in the world's largest public debt.
Five-year notes completed the biggest weekly gain since December on prospects Kan, who was appointed on Friday, will continue to press the Bank of Japan to maintain monetary easing policies. Bond futures also advanced amid signs Europe's debt crisis will prompt Group of 20 nations to delay their withdrawal of emergency stimulus.
"Kan will maintain his commitment to fiscal discipline and keep putting pressure on the BOJ, judging from his past comments," said Satoshi Yamada, manager of fixed-income trading at Okasan Asset Management Company in Tokyo, which manages $10.2 billion (Dh37.45 billion) in assets. "That means low rates will last longer in Japan, causing short-term notes to be bought."
The yield on the 0.5 per cent note due March 2015 fell 4.5 basis points to 0.385 per cent last week in Tokyo at Japan Bond Trading Company, the nation's largest inter-dealer debt broker. That was the biggest decline in yield since the week ended December 4. The price rose 0.210 yen to 100.539 yen. The yield was the lowest for debt with five years to maturity since August 2003.
Ten-year bond futures for June delivery gained 0.20 to 140.65 last week at the Tokyo Stock Exchange.
Kan's predecessor, Yukio Hatoyama, announced his resignation on June 2, citing a broken vow to relocate US troops and campaign funding irregularities.
"Kan has been pretty aggressive toward the BOJ, seeking monetary easing and an inflation target," said Akio Kato, team leader of Japanese debt at Kokusai Asset Management Company in Tokyo, which runs the Global Sovereign Open fund. "Investors are taking that into account."
