By Yoshiaki Nohara May 6 (Bloomberg) -- Japan’s bonds rose, pushing 10-year yields down to a four-month low, as stocks tumbled amid concern the Greek debt crisis will spread. Bond futures advanced to an eight-week high after European Central Bank council member Axel Weber yesterday said there is a threat of “grave contagion effects” from the debt crisis. Chancellor Angela Merkel appealed to the German Parliament yesterday to approve the nation’s 22.4 billion-euro ($28.8 billion) portion of the joint European Union-International Monetary Fund bailout amid public opposition. “Concern lingers over whether Greece will be able to execute the EU-IMF rescue plan,” said Akitsugu Bandou, senior economist in Tokyo at Okasan Securities Co. “The Greece crisis isn’t showing signs of stabilization. Stock losses are prompting bonds to be bought.” The yield on the 1.4 percent bond due March 2020 fell two basis points to 1.26 percent as of the 11:05 a.m. morning close at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.177 yen to 101.227 yen. The yield touched 1.25 percent, the lowest since Dec. 22. Ten-year bond futures for June delivery gained 0.26 to 139.94 at the Tokyo Stock Exchange on April 30. The contracts reached the highest level since March. The Nikkei 225 Stock Average tumbled 3.2 percent and the MSCI Asia Pacific Index of stocks dropped 1.8 percent. Japan’s financial markets were closed in Tokyo on May 3, 4 and 5 for public holidays. Greece Crisis Greece’s policymakers are set to debate today deficit- cutting measures needed as a condition of an international bailout. Moody’s Investors Service placed its Aa2 rating on Portugal’s debt on review yesterday for a possible downgrade. “The Greek debt issue weighed on stocks and yields in Europe and the U.S.,” said Makoto Noji, a senior market analyst at Mizuho Securities Co. in Tokyo, a unit of Japan’s second-largest banking group. “Japan’s market is following that trend and bonds are being bought.” Ten-year Treasury yields fell as much as 10 basis points and touched 3.49 percent in New York yesterday, the lowest level since Dec. 18, according to BGCantor Market Data. Japan’s 10-year yields may drop to 1.2 percent by the end of June, according to Okasan’s Bandou. Should his forecast prove accurate, investors who buy the securities today will make a 0.7 percent return, according to Bloomberg calculations. Gains in bonds were limited before a report tomorrow forecast to show the U.S. added jobs in April for a second month, signaling the world’s largest economy is recovering. U.S. Jobs “As U.S. reports continue to be strong, economic fundamentals may push up yields,” Akihiko Inoue, chief market analyst in Tokyo at Mizuho Investors Securities Co., a unit of Japan’s second-largest bank, wrote in a research note today. U.S. employers added 190,000 jobs in April, according to the median estimate of economists in a Bloomberg News survey. Japan’s government bonds have handed investors a 0.7 percent return so far this year, according to indexes compiled by Bank of America Corp.’s Merrill Lynch unit. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

Source