JGBs extend gains, 5-year yield hits 2-1/2-yr low

TOKYO, March 10 (Reuters) - Japanese government bonds extended gains on Monday, pushing the five-year yield to a 2-1/2-year low, as the shake-out in global credit markets has forced investors and hedge funds to unwind losing positions.

JGBs also got a boost from a nearly 2 percent drop in the Nikkei share average .N225 and a rise in Treasuries following last week's U.S. jobs data that suggested the economy may be in a recession.

The yield on five-year JGBs <JP5YTN=JBTC> dropped 2 basis points to 0.720 percent , taking it to the lowest since September 2005. March futures 2JGBv1 were up 0.36 point at 139.41, near the 2-1/2-year peak of 139.50 struck on Friday.

(Reporting by Eric Burroughs)