JGB futures fall as Nikkei climbs on exporters

By Satomi Noguchi

TOKYO, April 16 (Reuters) - Japanese government bond futures fell on Wednesday as Tokyo shares climbed and trimmed the safe-haven appeal of debt after better-than-expected quarterly results at U.S. firms provided some relief to investors worried about the slowing economy.

But losses in JGBs were limited as investors stayed largely on the sidelines due to caution about credit market conditions before earnings reports from major U.S. investment banks later this week, analysts said.

Tuesday's smooth auction of 30-year JGBs after two bad sales earlier in the month also helped to improve sentiment. Dealers had faced difficulties in trading following severe market volatility in March that made it difficult to use futures as an effective hedge on the offerings.

"The current yield levels don't appeal to investors, either to buy or sell," said Dohke Eiji, chief JGB strategist at UBS Securities, in a note to clients.

Dohke said that yields are too high for investors who want to take profits and they are too low for investors considering buying on dips.

"Movements among investors at the start of the business year lack momentum," he wrote.

June 10-year futures were down 0.20 point at 139.43 2JGBv1. They dropped to the day's low of 139.33 as the Nikkei share average .N225 climbed 1.6 percent, boosted by high-tech exporters after Intel Corp (INTC.O) affirmed its profit-margin target for 2008.

The benchmark 10-year yield edged up a half basis point to 1.350 percent JP10YTN=JBTC.

The yield on the new 30-year bond auctioned the previous day fell 2 basis points to 2.390 percent JP30YTN=JBTC, while the 20-year yield slipped a half basis point to 2.095 percent JP20YTN=JBTC.

The five-year yield rose a basis point to 0.850 percent JP5YTN=JBTC as some investors shifted money into longer-dated bonds, traders said. ($1=101.12 yen)

(Editing by Brent Kininmont)