JGBs dip as stocks gain, Treasuries slip

By Rika Otsuka

TOKYO, Oct 26 (Reuters) - Japanese government bonds dipped on Friday as investors took cues from a rise in share prices and an overnight fall in U.S. Treasuries, while data shed little light on the timing of the Bank of Japan's next interest rate rise.

Japan's nationwide core consumer price index fell 0.1 percent in September from a year earlier, government data showed on Friday, marking the eighth straight month of annual decline and matching the market's consensus forecast.

Industrial production fell 1.4 percent in September from the previous month, compared with forecasts for a 1.3 percent drop, a separate report showed.

Both indicators reinforced the widely held view the BOJ will keep interest rates on hold for a while.

But investors found it difficult to trade on those figures as they did not give a clear picture about when the next BOJ rate rise will take place, said Naomi Hasegawa, senior fixed-income strategist at Mitsubishi UFJ Securities.

"Market players sold JGBs in reaction to higher share prices and weaker Treasuries," Hasegawa said. "Data on CPI and output did not have a large impact on the bond market."

After the latest CPI and output data, swap contracts on the overnight call rate <JPONIBOJ=TRDT> are pricing in less than a 20 percent chance of a BOJ rate rise by the end of this year, little changed from before the data.

December JGB 10-year futures slid 0.09 point to 136.10 2JGBv1, pulling away from a one-month high of 136.26 reached during the previous day's regular session. Futures had risen as high as 136.27 in Wednesday's evening session.