JGB futures near 2-mth high, credit jitters remain
*Futures near 2-month high as credit jitters remain
*Profit-taking after three-day rally limited
*Longer-dated bonds supported by buying by life insurers
TOKYO, July 11 (Reuters) - Japanese government bond futures edged up on Friday near a two-month high as worries remained about the health of the financial sector and the economy, and investors continued to shift funds to the safe-haven debt.
Futures fell briefly into negative territory in early trade as some investors booked profits after a three-day jump which had sent the benchmark yield down to two-month lows.
A surge in oil prices CLc1 toward a record high on Thursday kept inflation concerns intact, providing an excuse to sell the bonds, analysts said.
But such selling was limited as Tokyo shares dropped and many investors preferred bonds after concerns deepened about big U.S. mortgage providers' ability to raise capital needed to purchase home loans after their shares and bonds tumbled on Thursday.
"The scope for long-dated JGB yields to rise is very limited as worries about the U.S. financial sector simmer, and when the outlook for stock prices is highly uncertain," said Jun Ishii, chief fixed-income strategist at Mitsubishi UFJ Securities, in a note to clients.
September futures 2JGBv1 rose 0.12 point to 136.22, staying near 136.40 hit the previous day, the highest since May 13. Futures erased early losses to 135.97.
The benchmark 10-year yield JP10YTN=JBTC fell a basis point to 1.565 percent, matching a two-month low hit on Thursday.
Longer-dated bonds have been supported by constant buying by life insurers, helping the 10-year yield to come down sharply from an 11-month high of 1.895 percent hit in mid-June.
Nippon Life, Japan's biggest life insurer, told Reuters on Thursday it increased its JGB holdings by 100-200 billion yen ($933.7 million-$1.87 billion) in the April-June first quarter of the current business year.
"There were bood buying opportunities both for 10- and 20-year bonds when taking a one-year horizon, so we made the investment earlier than we had planned," said Nippon Life. [ID:nTFD002972]
The five-year yield JP5YTN=JBTC edged down half a basis point to 1.135 percent, a touch above a two-month low of 1.120 percent hit the previous day. ($1=107.09 Yen) (Editing by Michael Watson)
