JGBs slide as Treasuries slump on Fed outlook

By Masayuki Kitano

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

JGBs also slid as market players prepared for the Finance Ministry's auction of 10-year JGBs on Thursday.

"The Bank of Japan is sticking to its stance towards raising interest rates while the U.S. Federal Reserve's post-FOMC statement casts doubts about whether the Fed will cut interest rates further this year or even next year," said Tatsuo Ichikawa, chief bond strategist for ABN AMRO Securities in Japan.

"That's a bit of a positive tailwind for the BOJ," he said.

December 10-year JGB futures fell by as much as 0.65 point to 135.34 2JGBv1 before trimming some losses to stand at 135.40 by midday.

That was still a decline of 0.59 point on the day, and down from a six-week high of 136.26 hit last week.

The benchmark 10-year yield rose 6.5 basis points to 1.665 percent <JP10YTN=JBTC> as of 0247 GMT.

Falls in JGBs were likely exacerbated by selling by dealers looking to hedge against possible losses, in the event that investor demand for the new 10-year bonds turns out to be tepid and they end up holding the bonds in their inventories.