JGB futures turn higher as Tokyo shares slip

By Masayuki Kitano

TOKYO, Feb 8 (Reuters) - Japanese government bond futures inched higher on Friday as a fall in Tokyo shares supported safe-haven demand for government debt and offset the impact from a slump in U.S. Treasuries overnight.

Concerns about a possible U.S. recession and problems with U.S. bond insurers, as well as potential demand from investors who have not bought JGBs for the current business year, continued to support the market. However, players remained wary of pushing yields towards two-year lows hit last month when stocks plunged.

"The trend in the JGB market has been for yields to hover at levels around 1.4 percent," said Akitsugu Bandou, senior strategist for Okasan Securities, referring to moves in 10-year yields over the past two weeks.

"When yields fall toward 1.40 percent, traders tend to use that opportunity to sell on rallies, while buybacks tend to emerge when yields rise close to 1.50 percent," Bandou said. March 10-year JGB futures rose 0.03 point to 137.87 2JGBv1, having trimmed losses after falling by as much as 0.41 point earlier in the day.

JGB futures dropped initially after U.S. Treasuries fell sharply on Thursday due to a dismal $9 billion auction of 30-year government bonds and a recovery in U.S. shares.

The benchmark 10-year JGB yield rose 1 basis point to 1.435 percent <JP10YTN=JBTC>, off an intraday high of 1.450 percent.

In the stock market, the benchmark Nikkei share average fell 0.8 percent .N225.

Data showing a bigger-than-expected drop in machinery orders was also a supportive factor for JGBs, said Naomi Hasegawa, senior fixed income strategist for Mitsubishi UFJ Securities.