JGB futures slip on Nikkei, caution before auction

By Satomi Noguchi

TOKYO, May 15 (Reuters) - Japanese government bond futures fell on Thursday, extending sharp losses suffered the previous day, as Tokyo shares gained and investors fretted before an auction of recently battered five-year notes.

JGBs briefly trimmed losses after data showed Japan's core machinery orders fell more than expected in March and a weak forecast for orders in the April-June quarter kept concerns intact that the domestic economy will deteriorate on flagging capital spending. [ID:nT285678]

But this lift was fleeting as market players became increasingly nervous about the outcome of a five-year auction later in the session, a day after the market experienced a near repeat of a sell-off late last month when futures posted their biggest one-day loss in five years.

"Everyone is watching how much investors are willing to buy the new issue after sell-offs in the past two months," said Maki Shimizu, a JGB strategist at UBS Securities Japan.

June 10-year JGB futures fell 0.21 point to 134.76 2JGBv1 after dipping as low as 134.63.

On Wednesday, the lead contract had tumbled nearly two full points at one stage to a seven-month low of 134.28.

The benchmark 10-year yield rose 3.5 basis points to 1.705 percent <JP10YTN=JBTC>, matching a seven-month high struck on Wednesday.

The Finance Ministry offered 1.9 trillion yen ($18 billion) in five-year debt with a 1.3 percent coupon as expected, up 50 basis points from the issue auctioned last month and the highest since the October issue. The results are due out at 0345 GMT.