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Posted by Monitor on August 15, 2008, 9:22 pm
Japan's Bonds Gain for Third Week on Growing Recession Concern
Aug. 16 (Bloomberg) -- Japan's 10-year bonds gained for a third week
on growing speculation the world's second-largest economy is on the
brink of a recession.
Ten-year yields fell to the lowest in almost four months during the
week after a government report on Aug. 13 showed the economy
contracted last quarter for the first time since 2001. Benchmark bonds
also advanced on speculation the central bank will cut its assessment
of the economy for a second straight month in a report next week.
``The GDP report in Japan suggested ongoing sluggish business activity
and the Bank of Japan is likely to downgrade its assessment of
business conditions next week,'' said Susumu Kato, chief economist in
Tokyo at Calyon Securities, one of the 26 primary dealers required to
bid at government debt sales. ``This is very supportive for JGBs.''
The yield on the 1.5 percent bond due June 2018 fell 1 basis point
this week to 1.455 percent according to Japan Bond Trading Co., the
nation's largest interdealer debt broker. The price rose 0.086 yen to
100.387. The yield fell as low as 1.415 percent on Aug. 14, the least
since April 21.
Ten-year bond futures for September delivery gained 0.01 this week to
137.69 on the Tokyo Stock Exchange. A basis point is 0.01 percentage
point.
The nation's gross domestic product shrank an annualized 2.4 percent
in the three months ended June 30 as exports and consumer spending
fell, the Cabinet Office said in Tokyo.
`Downside Risks'
``The economy is weakening and there are more downside risks,''
Japan's Economic and Fiscal Policy Minister Kaoru Yosano said at a
press conference in Tokyo on Aug. 13. ``With prices rising, consumers
are becoming cautious about spending and holding back consumption.''
The odds were 11 percent yesterday that the Bank of Japan will reduce
its target rate to 0.25 percent from 0.5 percent by year end,
according to calculations by JPMorgan Chase & Co. using interest-rate
swaps. The chance was 5 percent a week ago.
The gain in bonds this week was tempered on speculation 10- year
yields near the lowest since April deterred investors from buying
government debt.
The yield climbed as much as 6 basis points during yesterday's
trading, the biggest intraday gain since July 7, after a technical
chart traders use to gauge changes suggested the recent rally in bonds
was too rapid.
http://www.bloomberg.com/apps/news?pid=20601110&sid=aeOgC5ESo9Rg
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