JGBs slip on weak U.S. Treasuries, firmer stocks

By Chikako Mogi

TOKYO, Oct 10 (Reuters) - Japanese government bonds fell on Wednesday, taking their cues from a slide in U.S. Treasuries the previous session and a firm stock market.

Treasuries slipped on Tuesday on the view that the Federal Reserve may not cut interest rates this month after last week's firm U.S. jobs data soothed concerns about U.S. economic growth.

This has fuelled speculation that the Bank of Japan may have more leeway to raise interest rates this year.

Traders said investors were likely to buy bonds when yields rise as they reallocate funds in their portfolios for the second fiscal half-year that began this month, though this buying may be limited as the BOJ begins a two-day policy meeting on Wednesday.

"I expect the market to follow a similar trend from yesterday, trading weaker at the beginning on overseas moves, then seeing some dip-buying," said Tatsuo Ichikawa, fixed income strategist at ABN AMRO Securities.

"With the market trend increasingly looking to the downside technically, if investor demand for dip-buying is weak, it could prompt selling by trend-following CTA funds," he said.

Ichikawa said he expected the 10-year yield to trade between 1.710 and 1.745 percent and 10-year futures to move between 134.10 and 134.50 on Wednesday.

December 10-year futures ended the mornings session down 0.26 point at 134.27 2JGBv1, nearing the two-month low of 134.14 hit on Tuesday.