Japan’s 10-year bonds rose for a third day as speculation the global economic recovery is waning boosted demand for the safety of government debt. Benchmark yields fell to match the lowest level since August 2003 before a government report next week that may show the economy grew at the slowest pace in three quarters. Bond futures completed a fifth week of gains, the longest winning streak since March 2008, as a strengthening yen damped the outlook for the nation’s exporters and pushed the Nikkei 225 Stock Average into a bear market. “The economy is neither too hot nor too cold, but we know it’ll be cold going forward,” said Tadashi Matsukawa, head of the fixed-income division at PineBridge Investments Japan Co., which manages the equivalent of $70 billion. “That’s making it easier for investors to buy bonds.” The yield on the benchmark 10-year bond fell one basis point to 0.985 percent as of 4:04 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.1 percent security due June 2020 gained 0.090 yen to 101.031 yen. The yield earlier fell to 0.98 percent, matching the seven- year low touched Aug. 12 Ten-year bond futures for September delivery gained 0.17 to at 142.39 at the 3 p.m. close on the Tokyo Stock Exchange. The last time benchmark futures gained for five weeks was the period ending March 21, 2008. The Nikkei lost 4 percent this week. Slowing Growth Japan’s gross domestic product growth slowed to an annualized 2.3 percent in the three months ended June 30, from 5 percent the previous quarter, according to a Bloomberg survey before the Aug. 16 report. That would be the slowest since the three months ended September. A U.S. report yesterday showed more Americans filed applications for unemployment benefits last week than analysts had estimated, adding to signs the world’s largest economy is losing momentum. Longer-maturity bonds fell, snapping a two-day rally, as a technical indicator signaled their recent advance was due to end. Twenty-year bonds pared a weekly gain after their 14-day relative strength index dropped to 31 yesterday, approaching the level of 30 that some traders see as an indicator a security’s price is poised to change direction. “Investors are uncertain as to how low yields will go so they don’t want to maintain their positions very long,” PineBridge’s Matsukawa said. “We’re groping our way into uncharted territory. It’s a very difficult year for all of us.” The 20-year yield rose one basis point to 1.625 percent. Yen Concern Some Bank of Japan board members said the central bank needs to closely monitor the effect of a stronger yen and falling stock prices on the economy, according to the minutes of their July 14-15 meeting published today. Prime Minister Naoto Kan and central bank Governor Masaaki Shirakawa may meet next week to discuss the currency, the Asahi Newspaper reported today, without naming a source. “The theme of the market this week is the possibility the government will intervene in the currency market along with the Bank of Japan adopting additional credit-easing measures,” said Naomi Hasegawa, a senior debt strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo.

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