JGB futures slip from 1-mth high as stocks pick up

By Rika Otsuka

TOKYO, March 4 (Reuters) - Japanese government bond futures edged down on Tuesday, retreating from a one-month high hit the previous day as a rebound in stocks prompted investors to shift funds to equities.

Overall, activity was subdued as investors awaited the outcome of the Ministry of Finance's 1.9 trillion yen ($18 billion) auction of benchmark 10-year JGBs, the main focus for trade on Tuesday.

"The market should digest the new debt supply without much problem, although it could take two or three days to do so" due to the relatively low coupon, said Tetsuya Miura, a bond strategist at Shiko Securities.

The coupon was set at 1.4 percent, down from 1.5 percent last month and a level not seen since the Bank of Japan in March 2006 ended its super-loose monetary policy of flooding the banking system with funds to keep interest rates near zero.

"Once the market sees investor demand is not bad, more bond buying is likely to come in," Miura said.

March 10-year futures 2JGBv1 edged down 0.10 point to 138.60.

Traders said some dealers sold bonds in early trade to hedge against Tuesday's auction.

On Monday the lead futures contract touched 138.93, its highest since a 2-½ year peak of 138.94 hit on Jan. 23.