JGB futures approach 21-month high, eye on stocks

By Satomi Noguchi

TOKYO, Nov 15 (Reuters) - Japanese government bond futures rose towards a 21-month high on Thursday as late-session losses in the U.S. stock market drove gains in U.S. Treasuries overnight, encouraging investors to add debt holdings.

Wall Street stocks fell on Wednesday after an attempt to extend the previous session's big leap faltered in the face of persistent worries about more fallout from the housing downturn and credit crunch.

The Nikkei share average .N225 rose 0.3 percent by midday, but investors stayed cautious about taking risks and preferred to park funds in safe-haven government bonds.

The JGBs market is seen supported as financial markets still looked unstable in view of credit jitters and investor doubts about when the Bank of Japan will next be able to raise interest rates.

"The condition of the equity markets is still fragile, and it looks as if it will take some time to restore confidence after seeing a steep fall in U.S. stocks overnight," said Maki Shimizu, an interest-rate strategist at UBS Securities. "And that reinforces bullish sentiment in JGBs."

December 10-year futures 2JGBv1 rose 0.28 point to 136.79, edging near a 21-month high of 136.92 hit on Tuesday.

The JGB market has been heavily dependent for direction on global stocks, which traders see as a key gauge of risk appetite among investors in the wake of this summer's credit crunch.

The benchmark 10-year yield <JP10YTN=JBTC> fell 1.5 basis points to 1.500 percent, staying at 22-month lows hit before the BOJ scrapped its ultra-loose "quantitative easing" policy in March last year.