JGBs jump on Nikkei slump, unwind jitters fester

By Masayuki Kitano

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

The global credit market crisis had sparked a massive unwinding of market bets that went sour, leading to sharp swings in JGB futures over the past few weeks.

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, market players said.

"Futures have been strong while the 20-year and 30-year sectors have been weak," said Naomi Hasegawa, senior fixed income strategist for Mitsubishi UFJ Securities.

"People thought that such unwinding had subsided but the yield curve was distorted again yesterday, and market players are becoming wary again," Hasegawa said.

June 10-year JGB futures rallied to as high as 141.03 for a rise of 0.59 point, but later trimmed its gains to stand at 140.69 2JGBv1, up 0.25 point on the day.

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

Weakness in Tokyo share prices .N225 and the dollar's fall back below 99.00 yen stoked worries about the outlook for Japan's economy and bolstered demand for JGBs, market players said.