JGBs retreat on Nikkei rebound, upbeat data

* JGBs dip on Nikkei bounce, machinery orders spike

* Bargain hunters close in, trim JGB losses

* Superlong JGBs firm after US long bonds gain on oil

* May machinery orders beat forecasts, up 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 dropped in a knee-jerk reaction to the data, with September futures dipping as much as half a point, but bargain hunting soon trimmed losses.

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 soft stocks and good results of a five-year auction triggered a full point surge in futures and an 8 basis point drop in the benchmark yield.

"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 0.38 point at 135.20 after reaching a low of 135.05.

The five-year yield JP10YTN=JBTC rose 0.5 basis point to 1.210 percent after touching 1.230 percent.

The benchmark 10-year yield JP10YTN=JBTC rose 3.5 basis points to 1.650 percent.

The Nikkei stock average .N225 climbed 1.8 percent in response to the previous day's rise on Wall Street, which benefited as falling oil prices eased inflation concerns and the Federal Reserve hinted it would keep a lifeline open for banks. [.T]

But analysts did not read too much into the rebound by the Nikkei, which still remains on a shaky footing after its recent 12-day losing streak, the longest in over half a century.

The stronger-than-expected May machinery orders, often prone to veering far from consensus forecasts, were also taken with a grain of salt.