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Fri, Nov 09, 2001 - Page 21 News List

Japan's 20-year bonds slump on glut concerns


Japanese 20-year bonds slumped, pushing yields to their biggest rise in four months, after government plans to increase sales of the maturity raised concern the supply of longer debt may surpass investors' appetite for it.

The Ministry of Finance yesterday said it will increase sales of 20-year bonds every other month to ?600 billion from ?500 billion.

The yield on the most recently sold 20-year bond, the No. 52, which carries a 2.1 percent coupon, and matures in September 2021, rose 5.5 basis points to 1.965 percent, their biggest climb since July 2.

"Investors are concerned that the supply of longer debt will expand beyond their demand for it," said Kenji Takeuchi, who helps manage about US$8 billion at Asahi Life Asset Management Co.

That may push up 20-year bond yields to 2.3 percent by March 31, 2002, the fiscal year end, he said.

Twenty-year bonds were also hurt by concern the longer debt doesn't offer high enough yields compared with those on 10-year government securities, Takeuchi said. The difference between 20-year and 10-year yields yesterday widened to 63.8 basis points, above the 59.5 basis point average for this year. Still, Takeuchi said that spread would have to broaden to about 100 basis points before he would buy 20-year debt. The last time spreads were that wide was August 1999.

Pessimism about longer debt also reined in demand at the government's sale yesterday of ?30 billion in 30-year debt, Takeuchi said.

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