RPT-GLOBAL MARKETS-Government bond prices sink, eyes on oil
(Repeats to more subscribers in Asia) (Updates prices, adds Hong Kong stock market prices and comments)
HONG KONG, June 2 (Reuters) - Japanese government bond prices fell on Monday, hit by negative sentiment ahead of auctions this week and with global inflation on the rise, while oil prices held steady above $127 and Asian stocks edged higher.
Government bond yields in the euro zone, Japan and the United States hit 2008 highs last week as investors scrambled to protect their portfolios from inflation with the worst of the credit crisis apparently over.
"Credit markets and the U.S. economy have not been quite as bad as expected. Also inflation has proven persistent, in large part due to commodity prices," said Sean Callow, currency strategist with Westpac in Sydney.
"This has very much limited central banks from delivering the easings (in interest rates) that might have otherwise occured," he said.
Japan's Nikkei share average .N225 was 0.6 percent higher, with Sony Corp (6758.T) one of the biggest gainers after Goldman Sachs upgraded shares in the company to "buy." Sony rose 2.3 percent but overall market trading volumes were light.
Technology stocks also boosted Taiwan's TAIEX index 0.6 percent.
China Mobile (0941.HK) and China's third-largest oil producer CNOOC (0883.HK) led Hong Kong's Hang Seng index .HSI 1.2 percent higher, one of the largest risers in the region.
The MSCI index of shares in the Asia-Pacific region outside Japan .MIAPJ0000PUS added 0.3 percent, while a pan-Asian index rose 0.7 percent .MIAS00000PUS, on track for the third straight day of gains.
Shares in Thailand .SETI fell 0.9 percent after a tense weekend street protest aimed at forcing the government of Prime Minister Samak Sundaravej to step down. [ID:nBKK268711]
"Foreign investors are queing up to sell shares as the political turbulence drags on," a dealer at BT Securities said.
Nervousness about an upcoming 10-year note auction in the Japanese government bond market sent 10-year futures 2JGBv1 to the lowest since August 2007.
The benchmark 10-year yield, which moves in the opposite direction of the price, rose 2 basis points to 1.77 percent JP10YTN=JBTC.
"With market sentiment still bearish, the supply this week will be a challenge for investors as to how much they can absorb," said Chotaro Morita, chief JGB strategist at Barclays Capital in Tokyo.
The benchmark 10-year yield has surged about 50 basis points since mid-March, when the U.S. Federal Reserve backed a plan to bail out Bear Stearns and accepted a wider array of collateral to provide liquidity to the market. Continued...
