JGB futures up after pickup in US Treasuries
* Investors cautious about buying longer-term bonds
* Short-term notes underpinned by BOJ's easy monetary policy
* Japan's industrial output jumps but jobless rate worsens
By Kaori Kaneko
TOKYO, May 29 (Reuters) - Japanese government bond futures edged higher on Friday after U.S. Treasury debt recovered some ground, but investors brushed off mixed domestic economic data.
Short-term maturities rose, underpinned by the Bank of Japan's easy monetary policy, under which it buys commercial paper and corporate bonds from banks, analysts said.
"With some relief about the U.S. Treasury market and the recent rally in JGB yields, investors appeared to buy on dips," said Tatsuo Ichikawa, fixed income strategist at RBS Securities.
Japan's industrial output for April jumped 5.2 percent in April, the biggest monthly gain since 1953, but the jobless rate hit a 5-1/2-year high, household spending fell, and the country remained stuck in deflation. [ID:nT338777]
"Today's data showed a recovery in external demand, but domestic demand remains weak and the level of deflation is likely to increase," said Hitomi Kimura, fixed income strategist at JP Morgan Securities.
"So the economic environment is not ready for JGB yields to rise," she said.
June 10-year futures inched 0.06 point higher to 136.42 2JGBv1, recovering from a seven-month low of 136.02 on Thursday.
The benchmark 10-year yield JP10YTN=JBTC edged down 0.5 basis point to 1.475 percent. The yield rose to 1.500 percent on Thursday, the highest since November.
The five-year yield JP5YTN=JBTC inched down 0.5 basis point to 0.805 percent, and the two-year yield JP2YTN=JBTC was steady at 0.350 percent.
The two-year yield fell to a three-year low at 0.335 percent on Thursday after the auction of the maturity went smoothly and confirmed firm demand from Japanese banks.
"Investors feel safe buying short-term notes in view of the BOJ's steps," said Makoto Yamashita, strategist at Deutsche Securities.
"But they're refraining from taking risks in longer-term bonds as it is not certain whether U.S. yields are really turning lower or risk assets such as oil and stocks are truly recovering," he said.
The 20-year yield JP20YTN=JBTC rose 1.5 basis points to 2.140 percent and the 30-year yield JP30YTN=JBTC was up 0.5 percent to 2.225 percent.
The spread between the two- and 20-year yields widened to 179.5 basis points on Thursday, the highest in more than three years.
U.S. Treasury debt prices recovered some ground on Thursday after the end of a combined $101 billion in new issuance this week that had reinforced worries about the country's growing debt burden. [US/] (Reporting by Kaori Kaneko; Editing by Hugh Lawson)
