JGB futures fall on stock gains,pre-auction caution

By Chikako Mogi

TOKYO, Feb 4 (Reuters) - Japanese government bonds fell on Monday as a jump in Tokyo shares spurred selling of safe-haven government debt.

News last week of the first U.S. labour market contraction in 4-½ years renewed concerns about a recession, but that was overshadowed by reports that a group of banks were mulling a rescue measure for big bond insurers, said Tatsuo Ichikawa, chief JGB strategist at ABN AMRO.

"Stocks' gains are hurting JGBs. Concerns about the 10-year auction tomorrow are also putting upward pressure on yields," Ichikawa said.

The Ministry of Finance will offer 1.9 trillion yen ($17.8 billion) of 10-year JGBs on Tuesday, and Monday's rise in yields suggest the coupon will remain at 1.5 percent, traders said. The auction will be followed by a 500 billion yen sale of 10-year consumer price index-linked bonds on Thursday. March 10-year futures 2JGBv1 were down 0.44 point at 137.42, after falling as low as 137.30 and closing in on a one-month low.

The Nikkei share average .N225 was up 2.6 percent.

The benchmark 10-year bond yield <JP10YTN=JBTC> rose 3.5 basis points to 1.460 percent, moving away from a 28-month low of 1.310 percent hit last month.

The five-year yield <JP5YTN=JBTC> rose 4 basis points at 0.920 percent, while the two-year <JP2YTN=JBTC> was up 3 basis points to 0.580 percent.

The two-year yield sank to 0.485 percent last month, a two-year low and below the Bank of Japan's 0.5 percent overnight rate target, as expectations grew that the central bank may cut interest rates this year.