JGB futures jump as Nikkei slumps amid credit fears

By Satomi Noguchi

TOKYO, April 14 (Reuters) - Japanese government bond futures jumped more than half a point on Monday as Tokyo shares fell sharply, prompting investors to shift money back into safer debt.

Gains in futures were helped by a rise in U.S. Treasuries late last week after a sharp deterioration in consumer confidence and disappointing earnings news from General Electric Co (GE.N) that revived fears of a deep and prolonged U.S. recession.

Analysts said the meeting of Group of Seven finance leaders at the weekend gave the market little hope that the credit crisis was nearing an end, despite announcing a new plan to clean up banks and fresh resolve to rein in foreign exchange markets. [ID:nN13308317]

"The result (of the G7 meeting) was unsatisfactory to wipe out worries about credit risks," said Jun Ishii, chief fixed income strategist at Mitsubishi UFJ Securities in a note to clients.

June 10-year futures climbed 0.63 point to 139.94 2JGBv1 after jumping as high as 140.01.

Futures made up for all of their sharp losses just before the G7 meeting on the weekend and extended their gains as the Nikkei share average tumbled 2.8 percent .N225.

"Market players reversed the positions in JGB futures that they had sold just before the G7 due to caution over policy measures," said Akihiko Yokoyama, chief JGB strategist at JPMorgan Securities.

"The cautious remarks by the G7 leaders rather highlighted the difficulties policy makers are facing in finding a quick resolution to the current tough economic and credit conditions."

The benchmark 10-year yield fell 3.5 basis points to 1.340 percent JP10YTN=JBTC after dropping as low as 1.330 percent.

The five-year yield fell 3.5 basis points to 0.815 percent JP5YTN=JBTC, while the 20-year yield dropped a basis point to 2.100 percent JP20YTN=JBTC after touching a low of 2.090 percent.

The 30-year yield slipped 1.5 basis points to 2.410 percent JP30YTN=JBTC after falling as low as 2.405 percent as investors await Tuesday's auction of the same maturity.

Market players showed little reaction to the minutes of the Bank of Japan's March 6-7 policy meeting that showed the BOJ board agreed that downside risks to the U.S and global economy were heightening. [ID:nTKF003078]

Treasuries rallied on Friday after the worst consumer confidence reading in a quarter century and a surprise profit drop at General Electric slammed stocks and stoked demand for low-risk government bonds. [ID:nN11390617] (Editing by Hugh Lawson)