JGBs push higher on post-ECB relief, smooth auction

* JGBs climb, ECB cools expectations of further rate hikes

* Bond dealers relieved after smooth 10-year auction

* Benchmark yields up on the week after hitting 7-wk low

By Eric Burroughs

TOKYO, July 4 (Reuters) - Japanese government bonds pushed higher on Friday, with investors relieved after the European Central Bank failed to signal any further tightening of monetary policy and a 10-year bond auction the previous day went better than expected.

The ECB lifted rates to 4.25 percent as widely expected, but comments from ECB President Jean-Claude Trichet that the central bank did not have a policy bias helped cool expectations for more such hikes later this year. [ID:nL0323441]

The ECB's move to tighten rates to contain inflation, even as euro zone growth shows signs of faltering, was seen as a factor that could open the door for the Bank of Japan to also tighten monetary policy in the months ahead.

At the same time, the U.S. payrolls data on Thursday showed companies cutting 62,000 jobs in June, close to expectations and suggesting the economy is still suffering from the housing market slide and credit crunch.

The figures helped to cool speculation about how quickly the Federal Reserve could also consider lifting rates after its aggressive cuts to 2 percent.

A decent auction of 10-year paper the previous day also gave some relief to the market, which had suffered through a string of poor offerings during a three-month sell-off that petered out in mid-June.

"The ECB didn't sound as hawkish as feared, and the U.S. jobs report confirmed that the U.S. economy keeps deteriorating," said Naomi Hasegawa, senior interest-rate strategist at Mitsubishi UFJ Securities.

But Hasegawa said bond yields are prone to swinging in both directions as investors grapple with the potential inflationary impact of record high oil prices, just as the Japanese and global economies show more signs of losing steam.

"It could do in either direction. It depends on oil prices, global growth and how central banks will react," she said.

September 10-year futures 2JGBv1 climbed 0.37 point to 135.23.

Trading activity was subdued, with U.S. financial markets set to be closed later in the day for the Independence Day holiday.

The benchmark 10-year yield JP10YTN=JBTC fell 4.5 basis points to 1.625 percent, back near a seven-week low of 1.585 percent hit on Monday. But for the week, the 10-year yield is up 1.5 basis points.