JGBs fall as stocks inch up, Treasuries ease

By Chikako Mogi

TOKYO, Nov 26 (Reuters) - Japanese government bonds fell on Monday, taking the benchmark 10-year yield off a 26-month low, as a rise in Japanese stocks and softer U.S. Treasuries late last week dampened investor appetite for the safety of government debt.

After pushing the 10-year yield below 1.4 percent for the first time since September 2005 and sending futures prices to their highest since January 2006 on Thursday, players grew wary of taking the market higher in the absence of major domestic economic data this session, analysts said.

Japanese financial markets were closed on Friday for a national holiday.

Analysts said market sentiment remained bullish as global credit jitters continued and concerns grew that the U.S. economy could take a bigger hit from the housing market downturn.

"Players are seeing that the recent buying may have been a bit overdone as yields on short- to medium-term maturities have fallen to levels that are only justifiable when there are expectations for the Bank of Japan to cut interest rates," said Naomi Hasegawa, senior fixed-income strategist at Mitsubishi UFJ Securities.

"With U.S. economic data due later in the week and Japanese data not scheduled for release until later in the week, players will eye the stock market this session for direction," she said.

The 10-year yield <JP10YTN=JBTC> rose 2 basis points to 1.435 percent, off 1.395 percent hit on Thursday, the lowest since September 2005.

December 10-year futures 2JGBv1 fell 0.18 point to 137.12, after rising as high as 137.53 on Thursday, the highest since January 2006.