JGB futures climb to two-week high as stocks slump

By Satomi Noguchi

TOKYO, Oct 17 (Reuters) - Japanese government bond futures rallied on Wednesday to a two-week high as shares prices fell, with investors shifting funds from stocks to bonds.

Traders said a 1 percent fall in the Nikkei share average .N225 triggered technical-driven buying by foreign players, causing a quick rise in bond prices.

December 10-year futures 2JGBv1 were up 0.48 point at 135.21 after climbing as high as 135.23, the highest since Oct. 1. and further away from the two-month low of 134.14 hit last week.

Gains in government bonds were also helped by U.S. Treasuries, which rose on Tuesday as credit market worries and sliding Wall Street stocks prompted investors to seek the safety of government debt.

Analysts added that a strong 30-year debt auction on Tuesday boosted JGBs as it showed solid investor demand for super-long bonds -- those with maturities of more than 10 years -- and encouraged dealer buying of the long-dated bonds.

"Investors who had remained on the sidelines since early October finally moved to buy JGBs, starting to allocate funds for the fiscal half-year," said Akihiko Yokoyama, fixed-income strategist at JPMorgan Securities in Tokyo.

The benchmark 10-year yield <JP10YTN=JBTC> slipped 3 basis points to 1.665 percent, touching its lowest level in two weeks and falling further away from a two-month high of 1.745 percent struck last week.

"The strong 30-year JGB auction yesterday was comforting to market players who were anxious about investor demand," bond strategists at Shinko Securities said in a note to clients.