JGB futures dip on stocks, tepid investor demand

By Satomi Noguchi

TOKYO, April 7 (Reuters) - Japanese government bond futures dipped on Monday, erasing earlier gains as stocks rebounded, while tepid institutional demand disappointed dealers who had expected solid buying at the start of Japan's fiscal year.

JGB futures rose earlier, following gains in U.S. Treasuries late last week after the biggest monthly job loss in five years cemented the notion that the faltering U.S. economy is on the brink of a recession.

"With a risky factor such as the U.S. jobs report out of the way, we were expecting that institutional investors would move more actively to buy the bonds," said a bond trading manager at a Japanese bank.

"But market prices did not show such demand was coming."

Some analysts said gains in JGBs were capped by lingering optimism that the worst of the credit crisis is over and caution ahead of a Group of Seven meeting this weekend.

June 10-year futures fell 0.10 point to 139.55 2JGBv1, after climbing as high as 139.95 earlier.

The benchmark 10-year JGB yield slipped a basis point to 1.320 percent <JP10YTN=JBTC> but was off an earlier low of 1.300 percent.

The 10-year yield had jumped to a one-month high of 1.380 percent last week in volatile trade as domestic investors such as banks sold aggressively to lock in profits at the start of a new fiscal year in Japan.