JGBs retreat with Treasuries, 30-year auction eyed

By Eric Burroughs

TOKYO, April 15 (Reuters) - Japanese government bond futures retreated on Tuesday after a dip in Treasuries overnight on U.S. data showing a surprise rise in retail sales that eased some worries about a consumer pull-back causing a deep recession.

Bonds also fell as dealers sold some longer-dated paper to hedge their books before a 600 billion yen ($5.9 billion) auction of 30-year JGBs later in the session.

Analysts said the coupon of 2.5 percent on the new issue would draw demand as investors seek higher yields further out the curve. The 30-year yield <JP30YTN=JBTC> was untraded after finishing at 2.420 percent on Monday.

"If I have to buy bonds, I'd rather buy the 30-year," said Freddy Lim, an interest rate strategist at Morgan Stanley.

JGBs surrendered some of their gains from the previous day when the Nikkei share average .N225 slid 3 percent on worries about the U.S. economy after the earnings disappointment delivered by General Electric (GE.N: Quote, Profile, Research, Stock Buzz) on Friday.

But JGBs have been steadily falling on easing fears about the extent of the credit crunch's fallout, which has given a boost to stocks, particularly those of battered financial firms.

June 10-year futures 2JGBv1 dropped 0.27 point to 139.63, falling back near a one-month low of 139.13 struck last week.

The benchmark 10-year yield <JP10YTN=JBTC> rose 1.5 basis points to 1.350 percent.