Japanese 10-Year Bonds Post Weekly Advance on Rate Outlook

Japan's 10-year government bonds completed a second weekly gain on speculation deepening credit market losses in the U.S. will deter the Bank of Japan from raising interest rates.

Benchmark 10-year yields fell yesterday to a eight-week low after Treasuries gained when Federal Reserve Chairman Ben S. Bernanke said on Nov. 8 the U.S. economy is likely to ``slow noticeably.'' His comments suggest the Fed will cut rates again this year, further weakening the Bank of Japan's case for raising borrowing costs. Benchmark debt extended gains this week as reports of growing subprime-related losses in the U.S. boosted the allure of fixed-income securities.

``JGBs are likely to be affected by the impact of the U.S. housing slump,'' said Akitsugu Bandou, a senior strategist at Okasan Securities Co. in Tokyo. ``The Bank of Japan's aim to raise rates sooner is fading.''

The yield on the 1.7 percent bond due September 2017 fell 1.5 basis points to 1.525 percent as of 3:35 p.m. in Tokyo yesterday at Japan Bond Trading Co., the nation's largest interdealer debt broker. It earlier fell to 1.52 percent, the lowest since Sept. 13. The price rose 0.13 yen to 101.496 yen.

For the week, the 10-year yield declined 6.5 basis points, or 0.065 percentage point. Ten-year bond futures for December delivery rose 0.09 to 136.68 as of the afternoon close on the Tokyo Stock Exchange yesterday. They gained 0.59 this week.
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