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JGBs fall on Nikkei, Treasuries after U.S. steps
*JGBs fall, Treasuries drop on U.S. help for Fannie, Freddie
*Nikkei rise dents JGBs
*Investors cautious amid uncertainty over market's direction
TOKYO, July 14 (Reuters) - Japanese government bond futures fell on Monday, retreating further from a two-month high as Tokyo shares rose and Treasuries fell after the U.S. government unveiled measures to support embattled mortgage lenders.
The U.S. Treasury and Federal Reserve on Sunday offered emergency cash to troubled mortgage finance giants Fannie Mae (FNM.N) and Freddie Mac (FRE.N), and the Treasury also said it would buy shares in the companies to shore up investor confidence. [ID:nN13387357]
Analysts said JGBs tracked a drop in Treasuries in Asia after the U.S. government announced the massive aid package to head off a potential meltdown of global financial markets.
But investors remained uncertain about the market's direction, staying on the sidelines to watch the U.S. government's next steps and reaction from financial markets.
"We can't fully assess the impact of the U.S. measures yet, and it's hard to decide whether to sell or buy at this point," said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Securities.
September futures 2JGBv1 fell 0.21 point to 135.78 after dropping as much as 0.32 point to 135.67. They fell further from a two-month high of 136.42 hit on Friday.
The benchmark 10-year yield JP10YTN=JBTC rose 2 basis points to 1.615 percent, up from a two-month low of 1.555 percent hit late last week.
"Treasuries' drop seems to be the biggest factor affecting JGBs for now, but we are not really sure about the magnitude of the impact," said a trader at a Japanese bank.
"Cash bonds are trading rather firmly with buying on dips," the trader added.
The five-year yield JP5YTN=JBTC rose 2 basis points to 1.160 percent while the 20-year yield JP20YTN=JBTC also climbed 2 basis points to 2.205 percent.
Analysts said the medium-term segment could hold relatively firm on caution ahead of quarterly reports from U.S. banks including Merrill Lynch MER.N and Citigroup (C.N) later this week.
The Nikkei share average .N225 rose 1.1 percent by midday, erasing an earlier drop.
The Bank of Japan is expected to keep interest rates on hold at 0.5 percent at its two-day policy meeting starting on Monday.
The central bank is expected to warn that Japan's growth will likely be slower than it had expected a few months ago due to rocketing oil and raw materials prices. [ID:nT70058]
U.S. crude oil futures fell CLc1 on Monday but stayed in sight of an all-time high above $147 struck on Friday on geopolitical and supply worries. (Editing by Chris Gallagher)
