Kokusai Asset Management Co., which runs the world's second-largest bond fund, said Japanese government bond yields may drop to a record, even as larger fund supervisor Pacific Investment Management Co. expressed concern about the nation's rising debt levels.
Yields on 10-year JGBs may slide below 1 percent toward a record low reached in 2003 if concern about an economic slowdown increases, said Akio Kato, team leader for Japanese debt at Kokusai.
Bonds may gain as the Democratic Party of Japan and its ruling bloc, which lost their Upper House majority in Sunday's election, reaches out to smaller parties by demanding the Bank of Japan do more to keep borrowing costs low, he said.