JGB futures hit 2-mth high on renewed credit worries
* Renewed credit jitters boost appeal of bonds
* Japan wholesale prices at 27-yr high deepens econ worries
* Japanese banks, life insurers continue buying JGBs
TOKYO, July 10 (Reuters) - Japanese government bonds climbed on Thursday, pushing futures to two-month highs, as renewed credit jitters knocked Tokyo shares and boosted the safe-haven appeal of debt.
JGBs drew support from U.S. Treasuries, which gained on Wednesday as worries about credit-related losses at financial institutions dragged the S&P 500 into a bear market, joining the Dow and Nasdaq.
Faltering world stock markets have deepened concerns about the global and Japanese economies, prompting Japanese banks and life insurers to return to bonds after enduring a fierce market sell-off from late May to mid-June, analysts said.
Japan's wholesale prices rose a bigger-than-expected 5.6 percent in June from a year earlier to a new 27-year high, data showed on Thursday, adding to companies' gloom over deteriorating profit margins. [ID:nT3800]
"Falling U.S. stocks to new lows imply overall asset prices there are falling as well, which in turn would deepen the economic slowdown," said Tetsuya Miura, fixed-income strategist at Shinko Securities.
"Such a view has been offsetting inflation worries and has been behind the bond bull market since late June," he said.
September futures 2JGBv1 climbed as much as 0.65 point to 136.40, the highest since May 13, before retreating to 136.15, up 0.40 point on the day.
"Market players who had accumulated short positions in the past months are now forced to buy bonds back, and that's driving the market up," said a chief manager of bond trading at a Japanese bank.
The benchmark 10-year yield JP10YTN=JBTC fell 4 basis points to 1.570 percent and touched a two-month low of 1.565 percent.
The five-year yield JP5YTN=JBTC tumbled 4.5 basis points to 1.140 percent as Japanese banks chased up the medium sector, traders said. The five-year yield went as low as 1.120 percent, a level not seen since early May.
The two-year yield JP2YTN=JBTC fell 3 basis points to 0.775 percent.
Some analysts said life insurers are constantly buying longer-dated bonds on the view that inflationary worries could ease with emerging markets slowing, creating the case for a curve flattening, though such a view is not a market consensus. Continued...
