JGBs edge down as Tokyo stocks gain

TOKYO, Sept 5 (Reuters) - Japanese government bonds edged down on Wednesday after an overnight fall in Treasuries and gains in Tokyo shares dented sentiment.

Treasuries slipped on Tuesday as the Institute for Supply Management (ISM) report showed manufacturing expanded in August, albeit at a slower pace than in July.

Analysts said the ISM data showed the signs of continuing economic growth in August, easing concern that the credit squeeze of the past month might possibly tip the economy into recession.

An early 0.7 percent rise in the Nikkei share average prompted investors to trim their bets on fading chances of a Bank of Japan interest rate rise as early as this month.

"The JGB market is reacting to the ISM data, but most players are not doing much as they await more data from U.S.," said Katsutoshi Inadome, a fixed income strategist at Mitsubishi UFJ Securities.

September 10-year futures 2JGBv1 fell 0.10 point to 135.20, but stayed within range of 134.96 touched late last week for the first time since mid-August.

The yield of new benchmark 10-year bonds auctioned the previous day <JP10YTN=JBTC> rose 1.5 basis points to 1.660 percent.

Credit worries triggered by the U.S. subprime mortgage market meltdown set off a flight-to-safety rally in JGBs last month, helping to push the 10-year yield to 1.540 percent on Friday, which matched an 18-month low hit earlier in August.

The 20-year yield <JP5YTN=JBTC> edged up a basis point to 2.135 percent.