JGBs slip as buying pauses though more demand seen

By Naomi Tajitsu

TOKYO, Dec 5 (Reuters) - Japanese government bonds slipped on Wednesday as investors took a breather following a buying spree that has pushed the lead JGB futures contract to a 22-month high.

A slide in U.S. Treasuries on Tuesday kept a lid on market gains, but the benchmark 10-year JGB yield stayed near its lowest in more than two years, supported by expectations that a rate rise by the Bank of Japan is unlikely until well into next year.

"We're approaching key levels and the market is becoming more conscious of this, as well as the big gains we've seen recently," said Tetsuya Miura, a bond strategist at Shinko Securities.

December futures 2JGBv1 ended the morning session 0.12 point lower at 137.53, after climbing as high as 137.73 earlier in the day to match a 22-month high hit on Tuesday.

Analysts said market participants were aware of technical resistance at 137.80, though it was only a matter of time before futures broke through that level.

The 10-year yield <JP10YTN=JBTC> inched up a basis point to 1.450 percent, but stayed in range of a 26-month low of 1.395 percent hit late last month.

Following surprisingly strong demand at a 10-year auction on Tuesday, market participants said the maturity remained supported and the yield would likely take another stab below 1.4 percent later in the month.

The five-year yield <JP5YTN=JBTC> inched up half a basis point to 0.970 percent, after sliding to 0.960 percent on Tuesday for the first time since February 2006.