JGB futures edge up on lingering economy doubts
* Record GDP drop has little impact on JGBs
* Trade quiet ahead of BOJ meeting
TOKYO, May 20 (Reuters) - Japanese government bond futures inched up on Wednesday, underpinned by lingering uncertainty about the outlook for the economy, which logged its biggest contraction on record in the first three months of the year as expected.
Japan's economy shrank 4.0 percent in the first quarter, slightly less than the 4.2 percent drop expected by economists, who see a return to modest growth in coming quarters. [JPGDP=ECI]
"The data confirmed the severe condition of the economy, with sharp declines in capital spending, private consumption and housing investment," said Hidenori Suezawa, chief strategist at Daiwa Securities SMBC.
"But the impact from the data was limited as it was about a period in the past and investors had priced it in. But the outlook for the economy remains unclear, so investors are looking for chances to buy on the dips," he said.
Dealers said JGB trading would likely remain steady until July, when Japan will start to issue an additional 16.9 trillion yen of JGBs for the fiscal year to March 2010 to pay for a record economic stimulus package.
June 10-year JGB futures 2JGBv1 edged up 0.06 point to 137.23, erasing opening losses after most U.S. Treasuries prices slipped on Tuesday.
The benchmark 10-year yield JP10YTN=JBTC was up 0.5 basis point to 1.420 percent and the 20-year yield also inched up 0.5 basis point to 2.090 percent JP20YTN=JBTC.
Trade was quiet ahead of the Bank of Japan's two-day monetary meeting starting on Thursday.
The Nikkei business newspaper reported on Tuesday that the central bank is considering allowing financial institutions to put up U.S. Treasury bonds and other foreign debt instruments as collateral for open-market operations. [ID:nT231186]
Most U.S. Treasuries prices fell on Tuesday as higher stock prices for most of the day and news that some banks had asked to repay funds they accepted from the government during the financial crisis dampened the appeal of safe-haven government debt. [US/] (Reporting by Kaori Kaneko; Editing by Joseph Radford)
