Nov. 26 (Bloomberg) -- Japan's 10-year government bonds rose for a third week, the longest run in more than five months, helped by speculation investors will buy debt to keep up with changes in a benchmark index.
The security also advanced as Finance Minister Sadakazu Tanigaki yesterday signaled it is too early for the central bank to contemplate altering monetary policy given that deflation still prevails. The ruling Liberal Democratic Party will set up a special committee to debate the issue with Bank of Japan officials, the Nihon Keizai newspaper reported the same day.
The addition of securities to the Nomura Bond Performance Index, which is used as a benchmark for investors' portfolios, will raise the duration in November versus October, according Tamamizu. Duration is a measure of sensitivity to changes in yields.
Nomura Securities Co. will add debt including 10- and 20- year bonds sold this month to the index and cut securities due in a year or less, according to its Web site.
The government is concerned that a change in policy of pumping funds into the economy and keeping interest rates near zero percent to fight seven years of deflation will increase the cost of servicing its debt.
Five-year notes declined yesterday after an economic report showed core consumer prices stopped falling for the first time in five months. Inflation erodes the value of bonds' fixed payments.
``A halt in the slide in core consumer prices is a sell for bonds,'' said Naomi Hasegawa, a senior fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co.
Core prices, which exclude fresh food, were unchanged in October from a year earlier, the statistics bureau said yesterday in Tokyo, matching the median forecast of 32 economists in a Bloomberg survey. Prices fell 0.1 percent in September.
A single month without price declines isn't sufficient to signal that deflation is ending, Kaoru Yosano, the minister of economic and fiscal policy, said yesterday.
Japanese investors, mainly pension funds and life insurance companies, would like to see more 20-year bonds issued in the next fiscal year staring April, said Naoyuki Yoshino, head of the panel on Japan's debt issuance, after he attended a meeting yesterday between bond investors and finance ministry officials.
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