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JGB futures tumble as foreign funds sell before roll
* Futures tumble nearly a full point in thin trade
* Traders cite foreign funds dumping futures before roll
TOKYO, Sept 4 (Reuters) - Japanese government bond futures tumbled nearly a full point on Thursday with traders citing selling by foreign funds in a move exaggerated by thin trade.
September 10-year futures plunged as much as 0.93 point to 137.42 2JGBv1 as market players suspect that hedge funds sold a large amount of futures abruptly.
The move may also be tied to the lead contract's roll-over to December next week, market players said.
"A sudden selling of futures without any big cash bond market action showed the move was highly related to hedge funds who trade purely on technical reasons," said Satoshi Yamada, a senior strategist at Nikko Citigroup.
The lead contract fell 0.77 point to 137.58 2JGBv1 as of the end of morning trade, retreating from a four-month high of 138.80 hit last week.
Traders noted a variety of possible reasons for the sudden price slide and some said futures sellers may be trying to hedge against upcoming five-year utility bond issues.
"It may be related to investors dumping futures because the market hasn't risen as much as they wanted and they didn't want to hold futures before the roll-over," said a dealer at a Japanese bank.
"It may also be that some investors were worried after news of hedge funds crumbling due to slumping commodities and decided to book profits in a hurry," the dealer added.
The benchmark 10-year yield JP10YTN=JBTC climbed 4.5 basis points to 1.500 percent and jumped as high as 1.515 percent, a level not seen since early August.
Yamada at Nikko Citigroup said the jump in JGB yields has provided an unexpected bargain-hunting opportunity for Japanese investors who do not expect a sharp rise in interest rates in the near future.
Most market players believe the Bank of Japan is firmly on hold at 0.5 percent, with neither an interest rate cut nor a hike seen as a serious possibility in the coming months.
The 10-year yield had fallen as low as 1.400 percent last week.
The five-year yield JP5YTN=JBTC jumped 6 basis points to 1.060 percent and touched as high as 1.070 percent.
The two-year yield JP2YTN=JBTC edged up 1.5 basis points to 0.735 percent while the 20-year yield JP20YTN=JBTC rose 3.5 basis points to 2.115 percent.
Market players were wary of more unpredictable moves before comments from the European Central Bank and the Bank of England later in the day.
Analysts said the market is watching to see how those central banks address the deteriorating global economic outlook and how the local bond market reacts. (Additional reporting by Chikako Mogi, Shiho Tanaka; Editing by Chris Gallagher)
