Japan Bond Yields Rise to 7-Week High on Signs Recession Easing

Japanese bonds fell, pushing 10-year yields to the highest level in seven weeks, after government reports showed machinery orders and exports improved, curbing demand for the relative safety of debt.

Ten-year yields climbed the most in a week after the Cabinet Office said machine orders increased 9.7 percent in June and a Ministry of Finance report showed the current-account surplus widened for the first time since February 2008. Demand for debt also declined after U.S. reports last week showed companies cut fewer jobs than economists estimated in July and the jobless fell for the first time since April 2008.

“Machine orders in June were certainly good,” said Takashi Nishimura, a Tokyo-based analyst at Mitsubishi UFJ Securities Co., a unit of Japan’s largest bank by assets. “Risk appetite is improving and investors are looking for higher- yielding assets. Bonds are being sold.”

The yield on the benchmark 10-year bond rose 2.5 basis points to 1.455 percent as of 4:33 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 1.5 percent security due June 2019 fell 0.217 yen to 100.387 yen. The yield earlier climbed to 1.46 percent, matching the highest since June 22.

Twenty-year yields climbed four basis points to 2.185 percent and five-year rates increased 2.5 basis points to 0.74 percent. A basis point is 0.01 percentage point.

Ten-year bond futures for September delivery fell the most in two months, declining 0.37 to 137.22, at the afternoon close at the Tokyo Stock Exchange.

Should the 10-year yield advance to near 1.50 percent, investors will likely buy the securities, Nishimura said.

Machine Orders

Bonds declined after the Cabinet Office said machine orders, an indicator of spending by companies in the next three to six months, rebounded from a 3 percent decline in May. The current- account surplus widened to 1.153 trillion yen ($11.86 billion) in June, from 471 billion yen a year earlier, the Finance Ministry said.

U.S. employers cut 247,000 jobs in July after a 443,000 reduction in June, the Labor Department said Aug. 7. The jobless rate declined to 9.4 percent in July from 9.5 percent in June. link....