JGBs edge up as stocks tumble, gains limited before auction

By Satomi Noguchi

TOKYO, March 3 (Reuters) - Japanese government bond futures edged up to a fresh one-month high on Monday as Tokyo shares fell on renewed nervousness about the financial sector and investors opted for safe-haven buying of the debt.

JGBs were boosted by sharp gains in U.S. Treasuries on Friday when another round of weak economic data added to fears of recession, prompting bets on aggressive interest rate cuts by the Federal Reserve.

Gains in JGBs were limited, however, as dealers refrained from taking large positions and pushing down the benchmark 10-year yield to a level that could hurt demand at Tuesday's auction of the bonds in that maturity, analysts said.

"Price movements in JGBs are relatively stable compared with those stocks and U.S. Treasuries because the 10-year bond auction is just ahead," said Makoto Yamashita, chief JGB strategist at Lehman Brothers.

March 10-year futures 2JGBv1 were up 0.21 point at 138.68, after reaching as high as 138.74, their highest since January 23.

Traders said the dollar's extended slide against the yen could hurt Japanese exporters and their share prices, in turn supporting bids in the futures.

The benchmark 10-year yield fell a basis point to 1.345 percent <JP10YTN=JBTC> after dropping as low as 1.330, a one-month low.

The Nikkei share average .N225 was down 3.8 percent by late morning while the dollar hit a three-year low against the yen below 103 yen <JPY=>.