RPT-JGBs rise on equities slide, dim global outlook

(Repeats with bullet points)

* JGBs rise as Nikkei slides 5.3 percent

* Worries about domestic and global economies buoy JGBs

* Yield curve flattens, two-year notes underperform

By Kaori Kaneko and Masayuki Kitano

TOKYO, Oct 24 (Reuters) - Japanese government bond futures climbed on Friday to pull further away from three-month lows hit earlier this week, buoyed by a fall in share prices and concerns about the global economy's outlook.

JGBs gained as the benchmark Nikkei share average .N225 slid as much as 5.3 percent to its lowest level in more than five years. The yield curve flattened and yield spreads between two- and 20-year JGBs narrowed from the previous day, as funding costs remained high, helping to curb demand for short-term notes.

"Stocks are the trading factor for today as their falls make people feel that there is nothing else (but JGBs) to buy," said Satoshi Okumoto, general manager at Fukoku Mutual Life Insurance.

Market players are trying to discern just how badly Japan's economy will be bruised by the global financial crisis, he said.

"This started from the United States but there are fears that it may damage Japan's economy more severely than that of the United States as Japan depends heavily on overseas demand. JGBs tend to be picked up because of such fears," Okumoto said.

Data earlier this week showed Japanese exports grew just 1.5 percent in September from a year earlier, well below forecasts and showing that the trade-dependent economy may be falling into a recession.

December 10-year JGB futures rose 0.54 point to 137.65, 2JGBv1 pulling away from a three-month low of 135.46 hit earlier this week. Trading volume was light at around 9,000 lots.

The benchmark 10-year JGB yield fell 3.5 basis points to 1.465 percent. JP10YTN=JBTC

The yield curve flattened as 20-year yields fell 4.5 basis points to 2.135 percent JP20YTN=JBTC while two-year yields were unchanged at 0.710 percent. JP2YTN=JBTC

The 20-year/two-year yield spread narrowed to 142.5 basis points as a result, down from a three-month high of 147 basis points on Thursday.

Market players said gains in short-term JGBs were limited as funding costs stayed high, with the JGB general collateral repo rate staying at 0.60 to 0.65 percent, due to persistent concerns about counterparty risks.

The turbulence in financial markets has dented investors' appetite for risk. Such signs were apparent in a series of Reuters interviews with Japan's biggest life insurers, many of which have stressed the need for caution amid the market turmoil. [ID:nJPINS]

Japan's sixth-largest life insurer, Taiyo Life Insurance, said on Thursday it will take a cautious stance towards equities and foreign currency denominated assets in the six months to March.

But Taiyo Life stopped short of saying it would increase its holdings in domestic bonds, saying it plans to keep its yen bond holdings steady in the second half.

Dai-ichi Mutual Life Insurance, Japan's second-largest life insurer, said on Thursday it plans to make few changes to its portfolio in the second half of the financial year to next March while reshuffling some individual assets. (Additional reporting by Chikako Mogi; Editing by Michael Watson)