JGBs edge lower on Treasuries, debt auction eyed

By Satomi Noguchi

TOKYO, Oct 15 (Reuters) - Japanese government bonds edged lower on Monday, tracking a fall in U.S. Treasuries in the previous session, while hedge selling by dealers ahead of a 30-year JGB auction also weighed.

Treasuries fell on Friday after firm economic data eroded expectations of a Federal Reserve rate cut this month, which in turn increased the likelihood of a Bank of Japan interest rate hike this year or early next year.

Traders said super-long JGBs were trading heavily as dealers sold to hedge ahead of Tuesday's 30-year bond auction.

But with little major domestic economic data due out soon, most investors refrained from taking big positions and looked to developments in overseas markets and the performance of domestic stocks for direction, analysts said.

"The JGB market may not move much until there is a shift in expectations for a Fed interest rate cut after the Fed's Beige Book and housing data this week," said Tetsuya Miura, a bond strategist at Shinko Securities.

December 10-year futures 2JGBv1 dropped 0.17 point to 134.55, trading in a range above their two-month low of 134.14 hit last week.

The benchmark 10-year yield <JP10YTN=JBTC> rose 2 basis points to 1.720 percent, edging towards last week's peak of 1.745 percent, which was the highest since early August.

The yield on the five-year bonds auctioned the previous session <JP5YTN=JBTC> rose 2 basis points to 1.250 percent.