Japanese bonds fell, pushing 10-year yields to the highest level in two weeks, as Asian stocks extended a rally in equities worldwide on speculation the global recovery is regaining momentum. Thirty-year bonds dropped for a fourth day after a 600 billion yen ($6.8 billion) auction of the securities drew a lower bid price than analysts had forecast. Japanese investors boosted purchases of overseas stocks and bonds to the most in a month, Ministry of Finance data showed today. “The market has priced in deteriorating prospects for the economy too fast and too far,” said Hiroshi Nakamura, general manager of fixed-income investment in Tokyo at Mizuho Asset Management Co., a unit of Japan’s third-largest banking group by market value. “Ten-year yields below 1.20 percent are not sustainable from a fundamentals viewpoint.” The yield on the benchmark 10-year bond rose three basis points to 1.155 percent as of 1:39 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.1 percent security due June 2020 fell 0.267 yen to 99.509 yen. The yield earlier climbed to 1.165 percent, the highest level since June 23. The 30-year yield climbed 4.5 basis points to 1.955 percent. Ten-year bond futures for September delivery dropped 0.21 to 141.31 at the Tokyo Stock Exchange. The auction of 30-year debt had a lowest-accepted price of 106.20 yen, below the median forecast for 106.50 yen in a Bloomberg News survey. To contact the reporter on this story: Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net.

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