RPT-GLOBAL MARKETS-Government bond prices tumble; oil steady
(Repeats to wider coding with no changes to text)
HONG KONG, June 2 (Reuters) - Japanese government bond prices dropped on Monday, hit by negative sentiment ahead of auctions this week and with global inflation on the rise, while oil prices held steady above $127 a barrel. Asian stocks edged higher.
Bond yields in the euro zone, Japan and the United States hit 2008 highs last week as investors scrambled to protect their portfolios from inflation with the worst of the credit crisis apparently over.
"With market sentiment still bearish, the supply this week will be a challenge for investors as to how much they can absorb," said Chotaro Morita, chief JGB strategist at Barclays Capital in Tokyo.
Japan's Nikkei share average .N225 was 0.2 percent higher, with Sony Corp (6758.T) one of the biggest gainers after Goldman Sachs upgraded shares in the company to "buy." Technology stocks also boosted Taiwan's TAIEX index , up 0.23 percent.
The MSCI index of shares in the Asia-Pacific region outside Japan .MIAPJ0000PUS added 0.1 percent, while a pan-Asian index rose 0.4 percent .MIAS00000PUS.
Shares in Thailand .SETI were expected to lose ground on Monday after a tense weekend street protest aimed at forcing the government of Prime Minister Samak Sundaravej to step down. [ID:nBKK268711]
"Foreign investors are queuing up to sell shares as the political turbulence drags on," a dealer at BT Securities said.
Nervousness about an upcoming 10-year note auction in the Japanese government bond market knocked down the cash market on Monday and sent 10-year futures to the lowest since August 2007.
June 10-year futures 2JGBv1 dropped 0.89 point to 133.56.
The benchmark 10-year yield has surged about 50 basis points since mid-March, when the U.S. Federal Reserve backed a plan to bail out Bear Stearns and accepted a wider array of collateral to provide liquidity to the market.
Fears about inflation also have investors growing impatient with low yields in their portfolios. Central banks around the world continue to be under pressure to contain price pressures.
Data on Monday showed annual inflation in Australia rose to 4.5 percent, the highest in the 5-year history of the gauge and well above the Reserve Bank of Australia's 2-3 percent target.
Long-term expectations for U.S. inflation soared to the highest since April 1995, according to a report on Friday, heightening the danger that perceptions of high prices will become embedded within consumers.
Also, prices of soybeans and corn both rose last week, driven in part by fears over supply because of weather concerns and a strike by farmers in Argentina. Continued...
