Japan?s 10-year government bonds fell for a second day on speculation investors reduced their holdings to prepare for tomorrow?s auction of the securities.
Ten-year yields climbed toward a one-month high before the Ministry of Finance sells 2.2 trillion yen ($27 billion) of the bonds. Debt futures dropped as the yen weakened before the Bank of Japan and Federal Reserve hold policy meetings this week.
?Yields may be pushed up to 0.95 percent, which should secure demand for the auction,? said Satoshi Yamada, chief quantitative analyst at Tokyo-based Nikko Cordial Securities Inc. ?It?s hard for investors to make big moves now, as bonds may be sold after markets digest the outcome of the Fed meeting.?
The yield on the 0.8 percent bond due September 2020 rose 2.5 basis points to 0.945 percent as of 1:01 p.m. in Tokyo at Japan Bond Trading Co., the nation?s largest interdealer debt broker. The price declined 0.223 yen to 98.690 yen.
Ten-year yields reached 0.97 percent on Oct. 28, the highest since Sept. 28. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery fell 0.11 to 143.09 at the Tokyo Stock Exchange.
The prior 10-year sale on Oct. 7 drew bids worth 2.85 times the amount on offer, compared with a so-called bid-to-cover ratio of 3.16 at the September sale.
Primary dealers, which are required to bid at government debt sales, often reduce holdings of bonds in case prices decline before they can pass on the new securities to investors.
The yen fell to 80.66 per dollar from 80.40 in New York last week. It earlier touched 80.22 per dollar, the most since April 1995, when it climbed to a post-World War II high of 79.75.
U.S. Data
Losses in bonds were limited before a report today that economists said will show U.S. manufacturing grew at a slower pace, adding to expectations the Fed will take action to shore up the economy. The Japanese central bank is set to gather on Nov. 4-5 after the Fed?s meeting on Nov. 2-3.
?The BOJ wants to show it?s doing its part to support the economy and stave off political pressure,? said Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan?s largest lender by assets. ?The U.S. economic recovery will probably take time, providing a floor for bonds.?
The BOJ plans to discuss purchases of exchange-traded funds and real-estate investment trusts at its meeting. The bank left its key interest rate and credit programs unchanged on Oct. 28.
The Institute for Supply Management?s factory index in the U.S. dropped to 54 in October from 54.4 in September, according to the median estimate of economists surveyed by Bloomberg News before today?s data. Readings greater than 50 signal growth.
To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
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