JGB futures track Treasuries higher, investor demand eyed

By Satomi Noguchi

TOKYO, April 7 (Reuters) - Japanese government bond futures rose on Monday, tracking gains in U.S. Treasuries late last week, while expectations for fresh demand from investors at the start of the new fiscal year provided support for debt.

Treasuries rallied on Friday after the biggest monthly job loss in five years cemented the notion that the faltering U.S. economy is on the brink of a recession.

Many investors think the deepening deterioration in the world's biggest economy will hurt Japan and could prompt the Bank of Japan to cut interest rates later this year.

"Expectations that investors will start to buy is very strong and that may support the market this week," Kazuhiko Sano, chief strategist for Nikko Citigroup, wrote in a note to clients. He added that some caution may be needed over swift changes of direction in other markets such as U.S. financial markets.

Other analysts said gains in JGBs could be capped by lingering optimism that the worst of the credit crisis was over and caution ahead of a Group of Seven industrialised nations meeting this weekend.

June 10-year futures rose 0.15 point to 139.80 2JGBv1.

The benchmark 10-year JGB yield slipped 2 basis points to 1.310 percent JP10YTN=JBTC, sliding further from a one-month high of 1.380 percent hit last week.

Japan's government, racing to find a new BOJ head before a G7 finance meeting, has suggested acting Governor Masaaki Shirakawa take on the role permanently, while the leader of Japan's biggest opposition party signaled on Sunday that Shirakawa would likely win parliament's approval if nominated by the government. [ID:nT84377]

The BOJ is widely seen holding rates at 0.5 percent at its two-day policy meeting starting on Tuesday. (Editing by Hugh Lawson)