Japanese bond futures gained for the first time in six days

Japanese bond futures gained for the first time in six days as signs of slowing growth in Europe supported the demand for the safety of government debt.

Benchmark comparing its biggest weekly decline since September of regional stocks tumbled. The extra yield offered by 20-year bonds on the 10-year debt was near the widest in over two years before the auction of the securities of longer maturity.

"The decline in stocks prompted investors to unwind their short positions in bond futures," said Kazuya Ito, a fund manager at Daiwa SB Investments Ltd. in Tokyo. "Medium-term bonds were bought amid bargain hunting."

bond futures to ten years for December delivery gained 0.17 to 142.59 at the 3 pm close of Tokyo Stock Exchange. The Nikkei 225 Stock Average lost 1.4 percent, comparing its advance this week to 1 percent. The MSCI Asia Pacific Index of regional shares fell 1.5 percent today.

The yield on the benchmark 10-year-old lost a basis point to 0.995 percent as of 15:31 in Tokyo at Japan Bond Trading Co., the largest broker of interbank debt. The price of the warranty of 1 percent due September 2020 rose 0.089 yen to 100,044 yen. Production rose 6.5 basis points this week, the most since the five days ended Sept. 3.

The European gross domestic product grew 0.5 percent in the third quarter, half as fast as in the previous three months, according to economists' estimates compiled by Bloomberg. The office of the European Union statistics will release the report today.

The spread between yields on Japan's 20 - and 10-year bonds was 90 basis points, after reaching 90.9 basis points on Oct. 29, the highest since March 2008.

The 20-year auction

"The movements of the debt of 20 years would suggest investors are already preparing for the auction next week," wrote Kazuhiko Sano, chief strategist at Tokai Tokyo Securities Co., one of 24 primary dealers required to bid at the sales of public debt, in a report released today.

The Ministry of Finance will sell 1.1 trillion yen (13.4 billion euros) of debt to 20 years on 18 November. Intermediaries often reduce holdings of bonds before an auction in case prices decline before they can transmit the new securities to investors.

Gains in bonds were tempered as the yen trading near a one-month low reassurance to a stronger currency will hurt the profits of exporters. The yen has fallen 1.4 percent against the dollar this week, the biggest drop since the period ended Sept. 17. 82.80 reached on 10 November, the lowest since Oct. 7.

"With the yen in the midst of a correction, national actions may rise further," said Shinji Nomura, chief debt strategist in Tokyo at Nikko Cordial Securities Inc., one of 24 primary dealers required to bid at sales public debt. "The environment is unfavorable for the Japanese bond market, sending investors to the bank debt."