JGB futures hover near 1-mth low on Nikkei gains

TOKYO, Feb 14 (Reuters) - Japanese government bond (JGB) futures hovered around a one-month low on Wednesday, pressured by a climb in domestic stock prices to their highest level in nearly seven years, as well as a dip in U.S. Treasuries in the previous session.

JGB prices moved in tight ranges in early trading after tumbling on Tuesday as few investors were willing to take on significant positions ahead of upcoming data on domestic growth and a policy meeting by the Bank of Japan next week.

Analysts said that the market could inch lower, particularly if the Nikkei stocks average .N225 continues to trade around its highest level since mid-2000.

"With the slide in Treasuries and given the Nikkei's climb, a correction in the gains in futures from late last week is inevitable," said Hidenori Suezawa, chief JGB strategist at Daiwa Securities SMBC.

March futures 2JGBv1 slipped to 133.96 early in the session, matching a one-month low hit on Tuesday, as the Nikkei gained 0.72 percent to 17,748.73. At 0050 GMT, futures were down 0.01 point at 134.04, pulling away from 134.59 hit late last week.

The yield on the benchmark 10-year JGB JP10YTN=JBTC was unchanged at 1.735 percent, while the two-year yield JP2YTN=JBTC rose a basis point to 0.775 percent JP2YTN=JBTC, its highest level since mid-January which it matched last week.

JGBs also took a cue from U.S. Treasuries, which slipped on Tuesday on concerns that Federal Reserve Chairman Ben Bernanke could take an aggressive stance on inflation during his testimony on monetary policy to Congress. Bernanke will speak later on Wednesday.

Sentiment for government debt was also sluggish ahead of gross domestic product data due at 2350 GMT on Wednesday that is expected to have risen 0.9 percent in October-December from the previous quarter, or an annualised 3.8 percent.

Such growth would be the fastest in nearly three years and mark the eighth straight quarter of expansion.

The figures come before a BOJ policy meeting next week. Market participants are divided as whether the central bank will raise rates as recent comments from BOJ officials have offered few hints as to its interest rate outlook.

Swap contracts on the overnight call rate JPONI=TRDT indicate roughly a 35-40 percent chance that the BOJ will lift rates to 0.5 percent from 0.25 percent at its Feb. 20-21 meeting.