JGB futures rise on soft Nikkei in quiet trade

By Shinichi Saoshiro

TOKYO, June 20 (Reuters) - Japanese government bond futures rose on Friday, as investors shifted funds to safe-haven government debt as domestic stocks slipped despite gains on Wall Street the previous day.

JGBs started the day slightly lower, sagging on overnight losses in U.S. Treasuries and an initial rise in shares, but bonds rebounded as the Nikkei share average slipped into negative territory.

Market participants said the JGB market was struggling for direction, with low volume exacerbating price moves.

"The fact that JGBs fell yesterday despite seemingly supportive factors shows that the market thoroughly lacks a sense of direction," said Kazuhiko Sano, chief fixed-income strategist at Nikko Citigroup.

September 10-year JGB futures 1JGBv1 were 0.55 point higher at 133.78 after dipping to 133.05. On Thursday, the lead futures contract snapped a three-day winning run on expectations the Bank of Japan will stand pat on interest rates for the rest of the year.

The benchmark 10-year yield fell 5 basis points to 1.740 percent JP10YTN=JBTC after briefly touching 1.795 percent.

The market could gather its bearings after next month's BOJ tankan survey of corporate sentiment, and upcoming policy meetings by the Federal Reserve and the European Central Bank, said Sano at Nikko Citigroup.

Treasuries fell Thursday after a drop in jobless claims and rising factory costs renewed worries the Fed may have to tighten monetary policy before the end of the year. [US/]

The yield on five-year JGBs, exposed to heavy selling on Thursday, slipped 4.5 basis points to 1.350 percent JP5YTN=JBTC.

The Nikkei .N225 was down 0.7 percent in early trade. (Editing by Brent Kininmont)