JGB futures rise on bleak growth outlook, supply weighs

* Players look to buy on dips as economic oulook bleak

* JGB gains limited ahead of CPI-linked bond auction

* Upcoming new supply in Treasuries also eyed

By Chikako Mogi

TOKYO, Aug 6 (Reuters) - Japanese government bond futures rose on Wednesday as investors bought after a price dipped, but gains were limited on supply concerns ahead of an inflation-linked bond auction.

The Ministry of Finance will sell 500 billion yen ($4.6 billion) of consumer price index-linked JGBs on Thursday, following an offer of 1.9 trillion yen in 10-year fixed-rate bonds on Tuesday.

Tuesday's offer drew tepid demand because of its 1.5 percent coupon, down from 1.7 percent at last month's 10-year auction.

U.S. Treasuries retreated on Tuesday as a rally on Wall Street and lower oil prices drew investors away from safe-haven government debt while upcoming new supply of 10- and 30-year debt securities this week also weighed on sentiment. [US/]

"Players are wary of new supply in JGB and Treasuries markets this week, with sentiment particularly hurt by expectations the CPI-linked JGB auction will be weak as oil prices are falling," said Makoto Yamashita, chief JGB strategist at Lehman Brothers.

Oil prices fell below $120 per barrel CLc1 on Tuesday to a three-month low [O/R].

Beyond the supply concerns, however, a bleak economic outlook in Japan and elsewhere will continue to underpin the JGB market, as investors look to buy bonds when prices fall, traders said.

"Yields will likely face upward pressure this week on supply concerns but that will provide opportunities for investors looking to buy on dip. The growth slowdown is reflected in falling oil prices, which should also be positive for bonds as it eases inflation worries," Yamashita said.

Investors were looking to buy bonds to pick up income gains ahead of the end of September, when the first half of the current business year ends, traders said.

September 10-year JGB futures rose 0.16 point to 136.91 2JGBv1, after trading as low as 136.48, to inch towards a four-month high of 137.03 hit in evening trading on Monday.

The benchmark 10-year JGB yield was unchanged at 1.545 percent JP10YTN=JBTC, after rising as high as 1.565 percent early on Wednesday. The yield came off a four-month low of 1.495 percent hit on Monday.

The Federal Reserve kept interest rates steady at 2 percent as widely expected, and analysts said Tuesday's Fed statement was more balanced than what the market had expected as it expressed concern about both economic growth and inflation. [ID:nN05304800]

That left few clues as to when the Fed might raise interest rates. FEDWATCH

The Treasury Department plans to sell $17 billion of 10-year notes on Wednesday and $10 billion of 30-year bonds on Thursday. ($1=108.27 Yen) (Editing by Rodney Joyce)