JGBs slide on upbeat GDP data, Nikkei gains

By Chikako Mogi

TOKYO, Feb 14 (Reuters) - Japanese government bonds fell on Thursday as data showing Japan's economy grew at more than twice the forecast pace in October-December from the previous quarter eased worries about adverse effects from a U.S. growth slowdown.

Japan's economy grew 0.9 percent in the fourth quarter from the previous quarter, compared with a 0.4 percent increase expected by analysts. That translated into an annualised increase of 3.7 percent, compared with a forecast 1.6 percent rise.

The Nikkei stock average .N225 at one point rose more than 3 percent, weighing on JGBs, which had been supported by safe-haven bids from investors dumping risk assets such as stocks amid worries about further deterioration in credit markets and a possible U.S. recession hurting Japan's growth.

"The GDP data showed Japan's economy was doing better than people thought, suggesting there had been too much emphasis on pessimism over the growth outlook, which had been driven by soft data such as sentiment surveys," said Koji Ochiai, a senior market analyst at Mizuho Securities.

Surprisingly good U.S. retail sales data soothed recession fears, giving a boost to Tokyo shares, which ended the morning session up 2.8 percent.

"The JGB market is reacting to the surprises both from Japan and the United States," Ochiai said. "Safe-haven buying of bonds based on excess pessimism may abate."

March 10-year JGB futures opened down 0.39 point at 137.55 2JGBv1, and ended the morning session down 0.15 point at 137.79.

The 10-year JGB yield rose 1 basis point to 1.430 percent <JP10YTN=JBTC>, after rising to a session high of 1.450 percent.