JGB futures pull back from 9-mth high before auction

* JGB futures slip, dealers sell to hedge for 10-year sale

* Yield curve steepens as shorter maturities better supported

* Strong yen fans prospects of further BOJ monetary easing

* JGB 10-year yield posts biggest monthly fall this year

By Shinichi Saoshiro

TOKYO, Nov 30 (Reuters) - Japanese government bond futures inched down on Monday, pulling back from last week's nine-month high, as JGBs took a breather from a recent rally ahead of this week's auction of 10-year debt.

The yield curve steepened as speculation that the Bank of Japan may adopt further monetary easing held down yields of shorter-dated JGBs while those of longer maturities edged up before the 10-year sale.

JGBs rallied last week as the yen's surge to a 14-year high against the dollar stirred talk of eventual further BOJ easing. Investors also fretted that the yen's rise could add to deflationary pressure on the economy.

December 10-year futures fell 0.08 point to 139.74 2JGBv1, pulling away from a nine-month high of 139.95 hit during Friday's evening session 1JGBv1.

Selling by dealers trying to hedge for an auction of 10-year paper on Tuesday weighed on futures and the underlying cash maturities, market players said.

The benchmark 10-year JGB yield climbed 1.5 basis points to 1.260 percent JP10YTN=JBTC, up from a seven-week low of 1.245 percent hit on Friday.

The 10-year yield has fallen almost 15 basis points this month, its biggest monthly decline this year, as the yen's surge has helped ease concerns about the impact of a potential debt supply increase by raising the prospects of further BOJ easing and deepening deflation, analysts said.

"There is room for the benchmark yield to decline further if expectations of BOJ easing continue to expand. Such expectations will remain alive as long as the yen stays strong," said Akito Fukunaga, a fixed-income strategist at Credit Suisse.

Ten-year JGBs have recently become expensive but Tuesday's auction is expected to be well-received by investors on such expectations of further easing, Fukunaga at Credit Suisse said.

Bank of Japan Governor Masaaki Shirakawa said on Monday that the central bank shared the government's view that Japan was in moderate deflation and said the BOJ was always prepared to act promptly and decisively to ensure financial market stability. [ID:nT230286]

"I think it is true that the BOJ's view (on the economy) has become a bit more cautious due to the latest bout of yen strength and the Dubai shock," said Takafumi Yamawaki, an interest rate strategist for BNP Paribas Securities.

The United Arab Emirates offered banks emergency support on Sunday, the first steps to ease fears that a looming debt default by two of Dubai's flagship firms could derail the global economic recovery. [ID:nGEE5A02FN]

The two-year JGB yield was unchanged at 0.225 percent JP2YTN=JBTC and the five-year yield edged up 0.5 basis point to 0.540 percent JP5YTN=JBTC. Shorter-dated maturities were firm as they stand to receive more support than longer-dated JGBs if the BOJ were to ease monetary policy further.

The 20-year yield climbed 1.5 basis points to 2.020 percent JP20YTN=JBTC and the 30-year yield edged up 1 basis point to 2.155 percent JP30YTN=JBTC.

The five-year/20-year yield spread widened by half a basis point to 148 basis points, the highest in almost three weeks.

Japan's five-year credit default spread, which widened to a more than a seven-month high of around 80 basis points on Friday, changed hands around 75 basis points on Monday, traders said.

They said the Nikkei stock average's decline to a four-month low last week helped cause the spread widening, though such pressure eased a little as the Nikkei gained 2.9 percent on Monday .N225. (Additional reporting by Masayuki Kitano; Editing by Chris Gallagher) ((shinichi.saoshiro@thomsonreuters.com; Reuters Messaging: shinichi.saoshiro.reuters.com@reuters.net; +81-3-6441-1774)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))