JGBs edge down but trim losses as stocks slip

By Satomi Noguchi

TOKYO, Sept 5 (Reuters) - Japanese government bonds edged down in subdued trade on Wednesday after an overnight fall in Treasuries dented sentiment, but losses were limited as Tokyo shares gave up earlier gains.

Treasuries slipped on Tuesday after the Institute for Supply Management reported that U.S. manufacturing expanded in August, although at a slower pace than in July.

Analysts said the ISM data showed signs of continuing economic growth, easing concern that the credit squeeze of the past month might crimp the economy or even tip it into recession.

An early jump in Tokyo shares prompted investors to trim their bets on fading chances of a Bank of Japan interest rate rise as early as this month.

But dealers quickly bought government bonds back and squared positions as the Nikkei share average .N225 gave up all its early gains and slipped 0.07 percent by midday.

Trade was quiet as fresh data was lacking in Japan and investors awaited more U.S. economic reports this week as well as an interest rate decision by the European Central Bank on Thursday.

"The JGB market is reacting to the ISM data, but most players are not doing much as they await more data from U.S.," said Katsutoshi Inadome, a fixed income strategist at Mitsubishi UFJ Securities.

September 10-year futures 2JGBv1 fell 0.02 point to 135.28, recovering from a low of 135.14 hit earlier in the session.