Japan's 10-Year Bonds Rise as Stock Slide Spurs Demand for Debt

Japan's 10-year bonds gained for a second day as a slide in global stocks boosted demand for the relative safety of government securities.

Benchmark debt advanced as escalating losses tied to U.S. subprime-mortgage defaults reinforced expectations the Bank of Japan will hold off raising interest rates in the first quarter of 2008. Bonds also rose after a government report showed machinery orders fell more than economists expected.

``We are still at the first stage of seeing the effect of the U.S. subprime crisis, which is positive for the bond market,'' said Jun Fukashiro, a fund manager in Tokyo at Toyota Asset Management Co., which holds the equivalent of about $10.4 billion in assets. The decline in machinery orders is ``another positive factor for the bond market today,'' he said.

The yield on the 1.7 percent bond due September 2017 fell 2 basis points to 1.54 percent as of 5:42 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.173 yen to 101.366 yen.

The yield on the benchmark five-year note fell 1.5 basis points to 1.06 percent. A basis point is 0.01 percentage point.

Ten-year bond futures for December delivery rose 0.29 to 136.59 as of the afternoon close on the Tokyo Stock Exchange. The Nikkei 225 Stock Average slid 2 percent to 15,771.57.

Machinery orders declined a seasonally adjusted 7.6 percent to 958.7 billion yen ($8.5 billion) in September from August, the Cabinet Office said in Tokyo. The median estimate of economists surveyed by Bloomberg News was for a 1.5 percent drop.
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