JGBs slide as stocks jump on easing US credit fears

By Rika Otsuka

TOKYO, Feb 25 (Reuters) - Japanese government bond futures slipped towards a two-month low on Monday as Tokyo shares jumped after talk of a U.S. bond insurer rescue plan helped soothe credit jitters.

Adding to bearish sentiment was a fall in U.S. Treasuries late last week on the news that banks would unveil a plan to rescue Ambac Financial Group (ABK.N: Quote, Profile, Research, Stock Buzz) as early as Monday or Tuesday.

"JGBs were hurt as a strong rise in the Nikkei share average took the shine off of safe-haven government debt," said Hidenori Suezawa, chief fixed-income strategist at Daiwa Securities SMBC.

But trading activity was subdued somewhat as investors awaited a string of domestic and U.S. economic events later in the week for clues about future monetary policy of the Bank of Japan and the Federal Reserve.

The Japanese government will announce industrial output data on Thursday and reports on consumer prices, employment and housing starts on Friday.

The market will also be paying attention to comments from BOJ board member Atsushi Mizuho, who is slated to speak on Thursday. Mizuho had voted for higher rates since July but fell into line with the rest of the board in December and has been voting to keep rates steady since then.

Another focus in the market is who will replace BOJ Governor Toshihiko Fukui, who retires on March 19.

If the government and opposition parties cannot agree on a new central bank chief sometime soon, the possibility of a policy vacuum will rise.