JGBs retreat on Nikkei rebound, upbeat data
* JGBs dip on Nikkei bounce, machinery orders spike
* Bargain hunters close in, trim JGB losses
* May machinery orders beat forecasts, rise 10.4% mth/mth
By Shinichi Saoshiro
TOKYO, July 9 (Reuters) - Japanese government bonds fell on Wednesday as Tokyo shares followed Wall Street higher, curbing demand for safe haven debt.
JGBs were also hit by an upbeat economic reading, as May machinery orders jumped 10.4 percent from the previous month, much higher than the median forecast for a 1.1 percent rise.
The bond market fell in a knee-jerk reaction to the data, with September futures dipping as much as half a point, but losses were trimmed swiftly as bargain hunting kicked in.
Market watchers said investors are willing to buy JGBs on dips as not all were able to keep pace with Tuesday's bond rally, when futures surged a full point on soft stocks and good results of a five-year auction.
"Bargain hunting is likely to gradually gain the upper hand, as prospects of an economic slowdown and financial sector concerns are prevailing market themes," said Eiji Dohke, chief fixed-income strategist at UBS Securities.
September 10-year futures 2JGBv1 were down 0.16 point at 135.42 after reaching a low of 135.05.
The benchmark 10-year yield JP10YTN=JBTC rose 1 basis point to 1.625 percent following a brief stint at 1.650 percent.
The Nikkei stock average .N225 climbed 1.4 percent in response to overnight gains on Wall Street, which benefited as falling oil prices eased inflation concerns and as the Federal Reserve hinted it would keep a lifeline open for banks. [.T]
But analysts did not read too much into the Nikkei rebound. The index still remains on a shaky footing after its recent 12-day losing streak, the worst in over half a century, they said.
The stronger-than-expected May machinery orders, often prone to veering far from consensus forecasts, were also taken with a grain of salt.
Orders in April and May, if averaged, are still down relative to those from the January-March quarter, while higher raw material costs are likely to further squeeze profit margins going forward, economists say. [ID:nT3709]
(Editing by Brent Kininmont)
