Japan Five-Year Notes Set for Worst Week in Three Months as Stocks Rebound

(Bloomberg) -- Japan's five-year notes fell, set for the biggest weekly advance in yields in more than three months, on concern gains in stocks will cut demand for debt.

Demand for the securities was limited after the Yomiuri newspaper said a Bank of Japan report on April 27 will say consumer-price inflation, which erodes debt's fixed payments, will double next fiscal year. The Nikkei 225 Stock Average rebounded from its biggest drop yesterday since March 14.


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Japan's Government Bonds May Decline as Rising Stocks to Limit Debt Demand

(Bloomberg) -- Japan's government bonds fell on concern gains in stocks will dent demand for debt.

Benchmark 10-year bonds were set to complete a weekly decline after the Nikkei 225 Stock Average rebounded from its biggest drop yesterday since March 14. Demand for debt may also be limited after the Yomiuri newspaper said a Bank of Japan report next week will say consumer-price inflation will double next fiscal year, after falling short of its estimate for the current year.


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Brazil's Bonds Soar After Central Bank Dissenters Push for Bigger Rate Cut

(Bloomberg) -- Brazilian real-denominated bonds posted their biggest gain in seven months after the central bank signaled it may quicken the pace of interest-rate reductions.

The yield on the government's benchmark zero-coupon bond due in January 2008 dropped 19 basis points to a record low of 11.72 percent after three of the central bank's seven directors pushed for a bigger cut than the quarter percentage point reduction carried out last night. The dissenters voted for a half-point cut, to 12.25 percent.


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Japan's Two-Year Swap Rates Are `Too Low' Given BOJ Outlook, Mizuho Says

(Bloomberg) -- Japan's two-year swap rates are ``too low'' given that the central bank may raise borrowing costs as early as August, Mizuho Investors Securities Co. said.

Two-year swap rates may climb to 1.1 percent by August, the highest since 1997, as consumer spending helps the economy sustain its longest postwar expansion, said Akihiko Inoue, a Tokyo-based market analyst at Mizuho. The median forecast of 40 economists surveyed by Bloomberg News this month showed the central bank may raise rates to 0.75 percent from 0.5 percent in September.


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TREASURIES-Bond bulls emboldended by inflation pullback

(Reuters) - NEW YORK, April 17 - U.S. government bond prices rallied on Tuesday after data showed underlying inflation eased last month, indicating the Federal Reserve has room to cut interest rates if economic growth slows appreciably.

Consumer prices outside of food and energy, known as core inflation, rose just half of what Wall Street had forecast.


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U.K. 10-Year Bond Yields Rise to 6 1/2-Year High as Inflation Accelerates

(Bloomberg) -- Yields on U.K. two-year government notes touched their highest in about 6 1/2 years after a report showed inflation in Europe's second-biggest economy unexpectedly quickened in March to 3.1 percent, the fastest pace in a decade.

Benchmark gilts slid by the most in more than two months as traders added to bets rising consumer prices will prompt the Bank of England to lift interest rates twice more this year. BOE Governor Mervyn King said in a letter policy makers ``must ensure'' price expectations in the U.K. will be ``anchored.'' Inflation erodes the value of fixed income assets.


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Treasuries Rise as Report Shows Core Inflation Rate Decelerated In March

(Bloomberg) -- U.S. Treasuries rose a second day, pushing yields on benchmark 10-year securities to the lowest in more than a week, after a government report showed the pace of core inflation, which excludes food and energy, slowed in March.

The data may add to speculation the Federal Reserve will cut interest rates later this year. Yields on 10-year Treasury notes last week rose to the highest in two months after minutes from the most recent central bank meeting showed policy makers are more concerned about inflation than slowing economic growth.


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Fidelity's High-Yield Asia Fund Focuses on Bonds, Aims for $500 Million

(Bloomberg) -- Fidelity International Ltd., which manages $580 billion, launched its first fund to invest primarily in the high-yield debt of Asian emerging markets.

Andrew Wells, a Fidelity fund manager based in Hong Kong, said the Asian High Yield Fund aims to raise $500 million ``in a short space of time'' from investors in the region. The minimum individual investment is $2,500.


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TREASURIES-Little changed in Asia before March CPI

(Reuters) - Investors are bracing for the Federal Reserve to trim overnight rates from the current 5.25 percent later this year, although Fed officials say price pressures are the biggest threat and key data like the monthly payrolls report have been upbeat.

"A lot of accounts were excited about the possibility of a Fed ease, but the latest data shows that's not going to be the case," said a trader at a European investment bank in Tokyo.


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Freddie Mac sells $4.0 billion in bills

(Reuters) - The six-month bills were priced at 97.4459 and have a money market yield of 5.213 percent.

Settlement is April 17.


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Moody's says may cut SLM to "junk" on buyout

(Reuters) - "SLM's financial flexibility as well as debt protection measures for unsecured bondholders would be significantly impaired ... Cash flow coverage measures will be weak," the credit ratings agency said in a statement.

Moody's said its review for downgrade would consider the company's expected capitalisation, the extent of support from JP Morgan and Bank of America, and any possible structural protections that might be introduced to insulate SLM from financial stress.


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