JGBs inch up as Nikkei slumps but gains limited

By Masayuki Kitano

TOKYO, Feb 15 (Reuters) - Japanese government bonds edged higher on Friday, supported by a fall in Tokyo share prices and market expectations that the Bank of Japan was unlikely to raise interest rates anytime soon.

Gains were limited, however, after long-end Treasuries fell sharply overnight as U.S. bond traders turned their focus to inflation risks from more interest rate cuts signaled by the Federal Reserve.

"The moves have been a bit choppy today," said Naomi Hasegawa, senior fixed income strategist for Mitsubishi UFJ Securities. "Since both Treasuries and U.S. shares fell overnight it was hard to tell how JGBs would react."

Analysts say JGBs seem well supported overall as Japanese investors are likely waiting to buy on dips, especially when 10-year yields edge up towards 1.5 percent, a level last seen in late December.

March 10-year JGB futures rose 0.16 point to 137.61 2JGBv1, paring some of the losses they suffered the previous day.

The March contract rose as high as 137.68 in early trade, but later came off its highs.

Gains in JGB futures ran out of steam near 137.65, a level which had acted as resistance on the charts, said Hasegawa at Mitsubishi UFJ Securities.

JGB futures fell nearly half a point on Thursday after data showed that Japan's economy grew at more than twice the forecast pace in the October-December quarter.