JGBs slide as stocks jump on easing US credit fears

By Rika Otsuka

TOKYO, Feb 25 (Reuters) - Japanese government bond futures slipped towards a two-month low on Monday as Tokyo shares jumped after talk of a U.S. bond insurer rescue plan helped soothe credit jitters.

Adding to bearish sentiment was a fall in U.S. Treasuries late last week on the news that banks would unveil a plan to rescue Ambac Financial Group (ABK.N: Quote, Profile, Research, Stock Buzz) as early as Monday or Tuesday.

"JGBs were hurt as a strong rise in the Nikkei share average took the shine off of safe-haven government debt," said Hidenori Suezawa, chief fixed-income strategist at Daiwa Securities SMBC.

The benchmark Nikkei share average was up 2.1 percent .N225 at midday.

March 10-year futures dropped 0.29 point to 137.20 2JGBv1, crawling towards a two-month low of 136.94 struck last week.

The 10-year yield climbed 3 basis points to 1.480 percent <JP10YTN=JBTC>, after matching a two-month high of 1.490 percent first hit last week.

"A good amount of bargain-hunting kicked in when the 10-year yield neared 1.5 percent," said Akihiko Yokoyama, fixed-income strategist at JPMorgan Securities. "It may take a big, fresh factor for the benchmark yield to rise above 1.5 percent."

JGBs have been range-bound in the past month with investors hesitant to buy actively ahead of the March fiscal year-end, while expectations that the BOJ will not raise interest rates from the current 0.5 percent this year have limited bond selling.