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JGB futures climb to 2-mth highs on Treasuries, Nikkei

2008-11-21 01:36:00 GMT (Reuters)
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* JGB futures hit 2-mth high on US bond rally, Nikkei

* Nikkei sheds more than 3% on strong yen, Wall St plunge

* 10-yr yield below 1.400% for first time in 6 weeks

By Shinichi Saoshiro

TOKYO, Nov 21 (Reuters) - Japanese government bond futures advanced to a two-month high on Friday on a slide in Tokyo share prices and the previous day's decline in U.S. Treasury yields to historic lows.

December 10-year JGB futures climbed 0.49 point to 139.74 after hitting 140.10, their highest since mid-October.

"It is simple flight to quality -- bonds are being bought in response to a slide in equities," said Tatsuo Ichikawa, fixed-income strategist at RBS Securities.

Tokyo's Nikkei stock average dropped more than 3 percent, battered by a stronger yen and a slide in Wall Street the previous day which took the Standard & Poor's 500 index to its lowest level since 1997 amid deepening economic fears.

The benchmark 10-year yield slipped below the 1.400 percent threshold for the first time in six weeks, briefly touching 1.375 percent.

"The benchmark yield could prolong its stay below 1.400 percent given fast deteriorating economic prospects, but profit-taking will have to be digested first," Ichikawa at RBS Securities said.

After touching 1.375 percent, the 10-year yield pulled back to 1.390 percent, down 4.5 basis points on the day.

The five-year yield declined 4 basis points to 0.815 percent, its lowest since April.

The two-year yield was unchanged at 0.530 percent after dipping to 0.515 percent.

A two-day BOJ policy board meeting is scheduled to end later in the day. The market is focusing on what measures the central bank will consider to soothe a frazzled money market until a shrinking economy and the global fiancial crisis demand a more drastic change.

U.S. Treasuries rallied on Thursday as recession fears pummeled stock markets and drove investors to the safety of bonds and cash.

The 10-year Treasury note's yield was pushed down to 3.03 percent, the lowest level since 1958, according to Reuters data and Global Financial data.

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