JGB futures dip on Treasuries, MOF auction in focus

By Rika Otsuka

TOKYO, April 3 (Reuters) - Japanese government bond futures dipped on Thursday, hurt by an overnight fall in U.S. Treasuries on expectations an end to the Federal Reserve's campaign of cutting interest rates may be in sight.

Activity was subdued, however, as investors were cautious before results of the Ministry of Finance's auction of 500 billion yen ($4.9 billion) in 10-year inflation-linked bonds, due later in the day.

The debt sale was in focus as the MOF's benchmark 10-year JGB auction on Tuesday met with poor demand, raising worries about investors' appetite for government debt in the new business year, which started on the same day.

"The market will look to today's auction for clues on whether demand is improving for CPI-linkers, which investors dumped at the end of the last business year," said a trader at a European brokerage.

"Weak results will hurt sentiment and may spark bond selling."

As the global credit crunch worsened in the past few months, the CPI-linked JGB market has been battered by heavy selling from overseas investors, who hold the bulk of the bonds.

June futures edged down 0.10 point to 139.45 2JGBv1.

The benchmark 10-year yield was unchanged at 1.375 percent <JP10YTN=JBTC>, holding near a one-month high of 1.380 percent hit on Wednesday.