JGB futures tumble on solid data, stocks rally

By Rika Otsuka

TOKYO, Feb 21 (Reuters) - Japanese government bond futures tumbled on Thursday as better-than-expected export data underlined solid demand for Japanese goods, while gains in shares prompted investors to shift money to equities from bonds.

Government data showed on Thursday that exports rose 7.7 percent in January from a year earlier, beating a median forecast for a 6.4 percent increase and supporting the view that demand for Japanese goods in Asia and Europe cushioned soft exports to the United States. [nTKV003039]

"Exports were stronger than expected. The data shows that the U.S. economic slowdown isn't necessarily hitting growth in other parts of the world yet," said Takeshi Minami, chief economist at Norinchukin Research Institute.

A 2.1 percent jump in the Nikkei share average .N225 added to the bearish mood in the bond market.

March futures fell 0.49 point on the day to 137.26 2JGBv1 after slipping as low as 137.25.

As a result, the lead futures contract erased sharp gains made the previous day after a slump in Tokyo stocks and a report that a U.S. private equity group had yet to repay billions of dollars of commercial paper, which stirred credit worries.

The benchmark 10-year yield was up 4 basis points at 1.465 percent <JP10YTN=JBTC>.

Despite a bond sell-off on Thursday, market participants believe further losses in JGBs will be capped by expectations that the Bank of Japan will not raise interest rates from the current 0.5 percent this year.