JGB futures rise on short-covering despite strong data

By Satomi Noguchi

TOKYO, May 16 (Reuters) - Japanese government bond futures rose on Friday in a further rebound from a seven-month low as traders rushed to cover short positions after this week's plunge, shrugging off strong growth data.

JGBs also drew support from the previous day's gains in Treasuries and a better-than-expected five-year debt auction that soothed some fears about poor investor demand after the market sell-off over the past two months.

June 10-year JGB futures rose as high as 135.58 before retreating to 135.49 2JGBv1, up 0.34 point on the day, rebounding further from a seven-month low of 134.28 hit earlier this week.

"The market had already sold futures enough as they were cautious of strong GDP data beforehand. So short-covering is overpowering the market this session," said a manager of bond dealing section at Japanese Securities firm.

Japan's economy grew 0.8 percent in January-March from the previous quarter, beating market expectations for a 0.6 percent increase, Friday's data showed. [ID:nTKU003275]

On Wednesday, the lead contract had tumbled nearly two full points at one stage in a near repeat of a sell-off late last month when futures posted their biggest one-day loss in five years.

The benchmark 10-year yield edged down 1.5 basis points to 1.655 percent <JP10YTN=JBTC>, pulling further away from a seven-month peak of 1.705 percent first struck on Wednesday.

The yield of the new five-year note auctioned the previous day fell 3 basis points to 1.230 percent <JP5YTN=JBTC>, retreating further from a nine-month high of 1.320 percent hit on Wednesday.