JGBs rise, buoyed by slide in equities

TOKYO, Nov 2 (Reuters) - Japanese government bond 10-year futures edged higher on Monday, pulling away from a 2-½ month low hit last week, boosted by a slide in equities and a rise in U.S. Treasuries late last week.

* JGBs gained some reprieve after being sold off the previous month, when they retreated on worries about the size and details of debt issuance for the rest of this fiscal year and next.

* Ten-year JGB yields climbed 11 basis points in October, the biggest one-month rise in 10-year yields since May 2008, with the benchmark 10-year yield hitting a 2-½ month high of 1.425 percent JP10YTN=JBTC on Friday.

* Investors are likely trying to decide whether last week's drop in global equities marks a turning point, and it is too early to tell whether JGBs will see a significant short-covering rally, said Makoto Yamashita, chief Japan interest rate strategist for Deutsche Securities.

* "I still think an upward trend (for equities) remains in place. There is still no clear data to suggest there will be a double-dip in economic fundamentals," Yamashita said, referring to the outlook for the global economy.

* December 10-year JGB futures rose 0.20 point to 138.19 2JGBv1, pulling away from a 2-½ month low of 137.64 hit last week.

* The benchmark 10-year yield fell 2.5 basis points to 1.380 percent JP10YTN=JBTC.

* Japan's Nikkei share average fell 2.6 percent .N225 after the U.S. Dow industrials suffered its worst slide since July on Friday on concerns that the economic recovery won't be robust enough to sustain the seven-month stock rally.

* U.S. Treasuries climbed on Friday due to the slide in U.S. equities.

* The Ministry of Finance's plans to issue more JGBs to institutional investors this fiscal year to offset weak demand for JGBs among retail investors was broadly in line with market expectations, said Yamashita at Deutsche Securities.

* The MOF said on Friday that it would increase its issuance of JGBs to the market for the fiscal year through March 2010 by 2.1 trillion yen ($23.4 billion) to 132.3 trillion yen, adding it would cancel plans to issue inflation-indexed and floating-rate JGBs to the market this fiscal year. [ID:nT78079] * In addition to the reallocation announced on Friday, market players are bracing for the MOF to increase JGB issuance to the market by another 6 trillion yen or so this fiscal year to offset an expected tax revenue shortfall.

* Investors are also worried about the amount of JGB issuance for the next fiscal year that starts next April. (Reporting by Masayuki Kitano)