JGBs surge on Nikkei slump, unwind jitters fester

By Masayuki Kitano

TOKYO, March 27 (Reuters) - Japanese government bond futures rallied on Thursday in another day of steep moves, as a rise in the yen and a slump in Tokyo share prices spurred buying of safe-haven government debt.

JGB futures have seen some volatile swings over the past few weeks as the global credit market crisis sparked a massive unwinding of market bets that went sour.

Market players remain wary of the possibility of further moves to dump loss-making positions, although the bulk of such position liquidation is thought to be over.

"People thought that such unwinding had subsided but the yield curve was distorted again yesterday, and market players are becoming wary again," said Naomi Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ Securities.

June 10-year JGB futures rallied to as high as 141.03 for a rise of 0.59 point, but later trimmed gains to stand at 140.85 2JGBv1, up 0.41 point on the day.

The 10-year JGB yield fell 1.5 basis point to 1.260 percent <JP10YTN=JBTC>, edging back towards a three-year low of 1.215 percent struck on Wednesday.

Ministry of Finance data showed foreigners sold a net 2.3 trillion yen ($23.3 billion) of Japanese bonds last week, their largest net selling in data going back to January 2005. [JP/CAP]

The massive sell-off took place during a week when overseas hedge funds rushed to exit loss-making bets, triggering a plunge in 20- and 30-year JGBs.