Bonds to stay on a high

TOKYO MARKET: Nikkei

JAPANESE bonds are likely to stay near record highs this week, and stocks to enjoy mixed fortunes, as investors remain sceptical over the government's progress in shoring up the rickety financial system.

The ruling Liberal Democratic Party wants to pass bills aimed at preventing the collapse of troubled banks by early September. Opposition parties are stalling the passage of these bills, creating concern that could lead to a rise in short-term interest rates. That would hurt bonds, because it raises funding costs for banks and other investors, analysts said.

"The big question is whether the LDP and the opposition can compromise on the bills aimed at stabilising the financial sector," said Michael Lockrow, a senior economist at Thomson Global Markets. "Until the bills are passed, it's hard for banks to make a move."

Last week, the yield on the benchmark government stock rose by half a basis point to 1.18 percent.

Government bills currently before parliament would close insolvent banks and speed up the disposal of 77trn in bad and risky loans held by banks. They would also enable the government to take over management of insolvent banks and create bridge banks to provide funding for sound borrowers.

On Tuesday, investors expect the Ministry of Finance to auction about 1.1trn ($7.7bn) of 10-year government bonds with a record-low coupon of 1.5 per cent. Any rise in bonds may be limited before an auction of 10-year government bonds on Tuesday.

Companies are likely to rush to sell bonds to raise funds before their half-year book-closing at the end of September, underwriters said. With yields so low, demand for high-quality corporate bonds will probably be firm, said Michiya Seki, a trader at New Japan Securities.

On the stock market, progress toward a merger between troubled lender Long-Term Credit Bank of Japan and Sumitomo Trust and Banking could spur buying of bank shares. Finance Minister Kiichi Miyazawa praised a plan to reorganise LTCB in preparation for its merger with Sumitomo Trust.

The benchmark Nikkei 225 Stock Average gained 1.15 per cent last week, to 15,298.93. It will probably trade between 15,000 and 16,000 in the coming week, said Ichizo Yamauchi, research director at Kokusai Asset Management.

UP

Prudential Corp Plc

17 Aug - 21 Aug '98

Shares in the Prudential, Britain's largest life insurer, rose 11 per cent. The company is said to have threatened to fire one-third of its 4,000 sales staff if they do not meet new targets after a sales force review. Staff have to generate a minimum of pounds 56,000 of business each year. Senior managers said that the sales department, accused of malpractice and of breaching the Financial Services Act, has just two or three years to prove its worth. Brokers are also recommending the stock after an $18bn offer by US insurer AIG Group for Sun America on Thursday. This valuation shows the Pru's US annuity subsidiary, Jackson National, could be worth as much as 400 pence a share.

DOWN

Reed Intl Plc

17 Aug - 21 Aug '98

REED INTERNATIONAL shares suffered one of the biggest declines in the stock market last week, falling nearly 12 per cent.

The company, one of the world's largest publishers, was hurt after a leading broker published a report in which it advised selling the shares. It estimates the company has above-average exposure to the advertising industry and compound earnings growth over the years 1997 to 2000 will only be 5 per cent.

There are increasing pricing and competitive pressures within the franchise business. This leaves the stock looking expensive and the price could drop to 440 pence.

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'