JGBs dip on Treasuries, sluggish stocks limit losses

By Rika Otsuka

TOKYO, Nov 28 (Reuters) - Japanese government bonds slipped on Wednesday, following a plunge in U.S. Treasuries the previous day after Abu Dhabi's $7.5 billion cash injection into Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) helped ease credit worries.

Treasuries fell sharply on Tuesday on news that Abu Dhabi Investment Authority, the world's biggest sovereign wealth fund, will take a 4.9 percent stake in Citi, which has been one of the hardest hit by subprime mortgage sector problems and a consequent credit crunch.

But losses in JGBs were limited as investors believe global credit tightness is unlikely to be resolved quickly, with many other financial institutions struggling with losses stemming from the slumping U.S. housing sector.

Citi's Abu Dhabi deal "soothed excessive pessimism, while few think uncertainties over the subprime mortgage problems have completely diminished," said Tatsuo Ichikawa, a fixed-income strategist at ABN AMRO Securities.

Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz), the second-largest U.S. mortgage lender, said on Tuesday it would take a $1.4 billion fourth-quarter charge largely related to losses on home equity loans as the U.S. housing market deteriorates. [nnN27540716]

Weaker Tokyo shares also made investors careful about selling JGBs too aggressively, traders said. The Nikkei share average was down 0.29 percent at 15,179.45 by midday.

JGB futures have risen to their highest since January 2006, as turmoil in global financial markets has fuelled 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 Japan's fiscal year in March.

December 10-year futures 2JGBv1 opened the session weaker, then moved into the positive territory as the Nikkei fell. The lead contract rose 0.04 point to 136.93, edging towards a 22-month high of 137.53 hit last week.