Japan’s bonds fell, paring the biggest weekly gain in four months, before U.S. reports today that economists said will show consumer confidence improved and economic growth accelerated. Bonds slumped for the first time in four days after a report showed Japan’s consumer prices declined at a slower pace for a fourth consecutive month, reducing the allure of the fixed payments from debt. Benchmark 10-year yields rebounded from a three-week low as domestic stocks climbed, cutting demand for safer assets. “Most of the leading economic indicators are pointing upward,” Yuichi Onsen, who helps oversee the equivalent of $31 billion as chief strategist at T&D Asset Management Co. in Tokyo. “I remain bearish on bonds and bullish on stocks.” The benchmark 10-year yield added 2.5 basis points to 1.245 percent as of 3:04 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.2 percent security due December 2020 lost 0.218 yen to 99.606 yen. The yield reached 1.22 percent yesterday, the lowest since Feb. 2. It has dropped five basis points over the past five days, the biggest weekly decline since the period ended Oct. 8. A basis point is 0.01 percentage point. Ten-year bond futures for March delivery declined 0.20 to 139.59 at the 3 p.m. close. The Nikkei 225 Stock Average climbed 0.7 percent. U.S. Economy The Reuters/University of Michigan final confidence index for February climbed to 75.4 from a preliminary reading of 75.1, according to the median estimate of economists surveyed by Bloomberg News. U.S. gross domestic product grew at a 3.3 percent rate in the fourth quarter, faster than the 3.2 percent pace the government estimated in January, another survey showed before the Commerce Department report today. Japan’s consumer prices excluding fresh food declined 0.2 percent last month from a year earlier, the statistics bureau said today. The drop was the slowest since April 2009. Bonds also slumped after the nation’s public pension fund, the world’s largest, said it may become a net seller of the securities to cover payments. The Government Pension Investment Fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the 12 months ending March 31 to fund payouts. Sale may be less than that in the year starting April as bonds reach maturity, said Takahiro Mitani, president of the fund, known as GPIF. The Ministry of Finance will sell 2.2 trillion yen in 10- year bonds on March 1. Fuel Costs The slump in bonds was tempered on speculation higher oil prices will derail the global economic recovery. Libyan leader Muammar Qaddafi’s opponents consolidated their control of the country’s oil-rich east and Switzerland froze some of his assets. People “are worried that rising fuel costs will encourage American consumers to save and the economic outlook will deteriorate,” said Makoto Noji, a senior debt and foreign- exchange strategist in Tokyo at Nikko Cordial Securities Inc. “With falling confidence in U.S. consumer spending, investors respond to the higher oil prices by buying bonds.” Crude oil for April delivery jumped to $103.41 yesterday, the highest intraday price since Sept. 29, 2008. Libya holds Africa’s biggest oil reserves. To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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