JGBs edge up as market begins to digest supply news
* JGBs dip in early trading as Nikkei gains
* Losses reversed as investor demand begins to revive
* Nerves ease over looming supply increase
TOKYO, April 10 (Reuters) - Japanese government bonds reversed earlier losses and edged up on Friday as investor demand for debt revived a little with the market beginning to process news of a coming increase in supply.
JGBs were dogged much of the week by supply concerns as traders waited for the government to hammer out its plans for an economic stimulus package that is expected to be funded for the greater part by debt.
The ruling party unveiled on Thursday a $154 billion stimulus plan, worth around 3 percent of GDP, to battle deepening recession, and JGB issuance to pay for the stimulus is expected to top $100 billion. [ID:nT325185]
Market watchers said prospects of a supply increase were slowly being digested by investors now that the outline of the government's stimulus is out, underpinning JGBs on Friday.
"Nerves are a little calmer as we have been able to see what the economic package will involve," said Takafumi Yamawaki, a senior fixed-income strategist at BNP Paribas.
"Investors are still waiting to see how extra issuance will be spread out along the maturities but some also need to begin new fiscal year purchases."
Bonds retreated earlier as Tokyo's Nikkei stock average .N225 gained 1 percent following a rally on Wall Street the previous day, rising above the psychologically important 9,000 threshold for the first time since early January.
June 10-year futures 2JGBv1 gained 0.25 point to 136.78 after slipping to 136.44.
The five-year yield dipped 2 basis points to 0.875 percent JP5YTN=JBTC.
The 10-year yield fell 3 basis points to 1.445 percent JP10YTN=JBTC after hitting 1.490 percent, the highest since mid-November.
The 20-year yield rose 0.5 basis point to 2.110 percent JP20YTN=JBTC, with the super-long zone exposed to selling ahead of next week's 30-year JGB auction. (Editing by Hugh Lawson)
