JGB futures slide, track Treasuries down after Fed

By Masayuki Kitano

TOKYO, Nov 1 (Reuters) - Japanese government bonds fell sharply on Thursday, after U.S. Treasuries fell as the Federal Reserve cut interest rates but signalled it may hold off from more easing if the economy holds up.

JGBs also fell as market players prepared for the Finance Ministry's auction of 1.9 trillion yen ($16.5 billion) in 10-year JGBs later this session.

"The Fed's rate cut was in line with expectations but the post-meeting statement made note of inflationary risks," said Akitsugu Bandou, senior strategist for Okasan Securities.

"The JGB market had been strong recently, especially in futures, and I think we're seeing a bit of a pull-back from that," Bandou said.

December 10-year JGB futures fell by 0.58 point on the day to 135.41 2JGBv1 as of 0054 GMT, pulling away from a six-week high of 136.26 hit last week.

The benchmark 10-year yield rose 5.5 basis points to 1.655 percent <JP10YTN=JBTC>.

Judging from current market conditions, it remains a close call as to whether the coupon rate at Thursday's 10-year auction will be set at 1.6 percent or 1.7 percent, Bandou said.

The last time the coupon rate at a 10-year JGB offer fell as low as 1.6 percent was in March 2006.