Japan’s 10-year bonds completed their biggest weekly gain in four months as speculation higher oil prices will derail the global economic recovery boosted demand for the relative safety of government debt. Benchmark 10-year yields touched a three-week low as an uprising in Libya sent oil to the highest since 2008 and a government report showed Japan’s exports grew at the slowest pace in 14 months. The cost to insure Japanese debt against default increased after Moody’s Investors Service cut its outlook for the nation’s sovereign-debt rating. “People are buying bonds in part because of speculation a surge in oil prices will cause the economy to deteriorate,” said Akitsugu Bandou, a senior economist in Tokyo at Okasan Securities Co. “Investors are waiting to bargain hunt.” The benchmark 10-year yield fell five basis points this week to 1.245 percent as of 4:16 p.m. in Tokyo yesterday at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.2 percent security due December 2020 rose 0.434 yen to 99.606 yen. A basis point is 0.01 percentage point. The yield’s weekly drop was the biggest since Oct. 8. It reached 1.22 percent on Feb. 24, the lowest since Feb. 2. Ten-year bond futures for March delivery climbed 0.57 to 139.59 at the Tokyo Stock Exchange. Crude oil for April delivery jumped to $103.41 on Feb. 24, the highest intraday price since Sept. 29, 2008. Libyan leader Muammar Qaddafi’s opponents consolidated their control of the country’s oil-rich east and Switzerland froze some of his assets. The country holds Africa’s biggest oil reserves. Moody’s Outlook Japan’s exports increased 1.4 percent from a year earlier in January, the Ministry of Finance said on Feb. 23. That was the slowest growth since a 6.3 percent drop in November 2009. Moody’s cut its outlook for Japan’s Aa2 credit rating to negative from stable on Feb. 22, citing the risk the government won’t do enough to tackle the nation’s debt burden. Five-year credit-default swaps on government bonds rose to 83 basis points, the highest reading since Jan. 31, according to CMA prices. Bonds pared their weekly gain yesterday after data showed consumer prices fell at a slower pace for a fourth consecutive month, reducing the allure of the fixed payments from debt. Consumer prices excluding fresh food declined 0.2 percent from a year earlier last month, the statistics bureau said. The nation’s public pension fund, the world’s largest, said it may become a net seller of bonds 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. 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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