JGBs rise as Lehman rekindles credit fears
* Lehman woes push investors toward safety of government debt
* JGBs helped by slide in Nikkei, rise in U.S. Treasuries
* Lead futures contract to shift to December from September
* Futures still distorted, Sept/Dec spread remain negative
By Chikako Mogi
TOKYO, Sept 10 (Reuters) - Japanese government bonds rose on Wednesday, helped by a fall in Tokyo shares, as worries about Lehman Brothers' LEH.N ability to raise capital rekindled credit jitters and pushed investors to seek safety in government debt.
Financial stocks dragged the Nikkei share average .N225 nearly 2 percent lower in early trade on Wednesday, after Lehman sank 45 percent the previous day. [ID:nN09324233].
The flight to safety lifted U.S. Treasuries overnight, lending support to JGBs.
"Sentiment in the JGB market is strengthened by the rise in U.S. Treasuries and falling share prices," said Makoto Yamashita, chief JGB strategist at Lehman Brothers in Tokyo.
Japan's deteriorating economy and expectations the Bank of Japan will keep interest rates steady at 0.50 percent for a while will likely sustain investor appetite for JGBs, analysts said.
In the futures market investors were unwinding speculative positions linked to a change in the lead contract.
September 10-year JGB futures rose 0.73 point at 137.60 2JGBv1, while the December contract, which is the next benchmark, was up 0.31 point at 138.14 2JGBZ8.
As investors unwind long positions in the September contract to roll into the new benchmark, the strong demand for the December contract kept the spread between September and December in negative territory at minus 0.55 point 2JGBU8-Z8. It widened to as much as minus 1.07 point on Tuesday.
Benchmark 10-year JGB yields fell 2.5 basis points to 1.475 percent JP10YTN=JBTC, pulling back from a one-month high of 1.550 percent hit on Monday. The five-year yield JP5YTN=JBTC fell 6 basis points to 1.035 percent, also moving away from a six-week high of 1.145 percent touched on Monday.
The futures market has seen sharp swings in the last few weeks, with traders saying commodity trading advisers, or CTAs, and other foreign hedge funds were driving the moves.
