JGB futures jump towards 22-mth high on safety bid

By Rika Otsuka

TOKYO, Nov 27 (Reuters) - Japanese government bond futures jumped towards a 22-month high on Tuesday as investors sought refuge in government debt amid further signs of credit market-related damage at financial firms.

JGB prices rose after a rally in U.S. Treasuries prompted U.S. two- and 10-year yields to post their biggest one-day drop in more than three years on Monday after Goldman Sachs downgraded HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) to "sell" and media reported that Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) was considering layoffs.

Bond prices and yields move inversely.

"The single biggest market-moving factor is credit concerns at the moment," said Makoto Yamashita, chief JGB strategist at Lehman Brothers in Tokyo.

JGBs have rallied in the past month, as turmoil in global financial markets has fueled investor doubts over whether the Bank of Japan will lift interest rates to 0.75 percent from the current 0.5 percent before the end of this fiscal year in March.

December 10-year futures 2JGBv1 soared 0.55 point to 137.34. The lead contract rose as high as 137.53 last Thursday, its highest since January 2006.

The 10-year yield <JP10YTN=JBTC> fell 4.5 basis points to 1.435 percent, crawling towards a 26-month low of 1.395 percent reached last Thursday.

The benchmark yield has fallen nearly 60 basis points since it hit this year's peak of 1.985 percent in mid-June, before losses linked to the U.S. subprime mortgage crisis led to drastic tightness in global credit markets.