By Yasuhiko Seki April 19 (Bloomberg) -- Japan’s bonds rose for a fifth day, the longest winning streak this year, as a decline in stocks boosted demand for the relative safety of government debt. Benchmark 10-year yields fell to the lowest in five weeks as stocks around the world tumbled after the Securities and Exchange Commission sued Goldman Sachs Group Inc. for fraud tied to collateralized debt obligations. U.K. Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry into Goldman, while Germany’s financial regulator asked the SEC for details on the suit. “The latest development at Goldman Sachs will drag on the equity market and damp investments in riskier assets,” said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., a unit of New York-based Citigroup Inc. “This will support government bonds.” The yield on the 1.4 percent bond due March 2020 fell three basis points to 1.31 percent at 12:45 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.264 yen to 100.789 yen. The yield earlier dropped to 1.305 percent, the lowest since March 11. Ten-year bond futures for June delivery gained 0.39 to 139.32 at the Tokyo Stock Exchange. The Nikkei 225 Stock Average slid for a second day, losing 1.9 percent. Japan’s bonds often move in the opposite direction to stocks. Ten-year yields had a correlation of 0.6 with the Nikkei this month. A value of 1 means the two moved in lockstep. Stocks Slump U.S. stocks slumped on April 16 when the SEC said Goldman Sachs created and sold CDOs tied to subprime mortgages in early 2007, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Brown said he was “shocked” at the “moral bankruptcy” indicated in the suit. The German government “will ask the SEC for information,” said Ulrich Wilhelm, a spokesman for Chancellor Angela Merkel. “Then we will look at the records and consider possible legal steps.” “The Goldman case raised speculation about tighter regulations on financial product trading, triggering sell-offs of riskier assets ranging from stocks to commodities,” said Shinji Nomura, chief debt strategist in Tokyo at Nikko Cordial Securities Inc., part of Japan’s third-largest banking group. Recovery ‘at Work’ The gain in bonds was tempered before a report this week that economists said will show Japanese exports surged more than 40 percent last month. Shipments abroad rose 45.4 percent in March from a year earlier, following a 45.3 percent increase the previous month, as global trade rebounded, according to a Bloomberg News survey before the April 22 report. “The trade report is likely to show that a solid recovery is at work,” said Masashi Nakamura, a Tokyo-based economist at Mizuho Research Institute Ltd. “This will create the basis for a renewed rise in bond yields.” Bank of Japan Governor Masaaki Shirakawa last week told his regional managers the economy has been picking up moderately and the risk of a return to a recession has diminished. “Concerns that the Japanese economy would drastically deteriorate again have pretty much gone, although the pace of the pickup will probably remain moderate for the time being,” Shirakawa said at the quarterly branch meeting in Tokyo on April 15. He pledged to keep an “accommodative” policy in order to beat deflation. To contact the reporter on this story: Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net.

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