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JGB futures depict

downward movement

TOKYO: Key Japanese government bond (JGB) futures extended their losses to finish the day almost one and a half points lower, dealers said.

With selling momentum accelerated by the yen's easing against the dollar and Tokyo stocks' continuing recovery, the key September futures closed at 116.70, down 1.49 from Tuesday.

The closing is the lowest level since the then-benchmark contract ended at 116.25 on May 2.

"No one had foreseen that the yen's falls would create this favourable mood for stocks and push (the Nikkei) above 18,000," said a bond analyst at a city bank.

The Nikkei average rose above a key resistance point of 18,000, ending 706.01 points higher at 18,158.73, its highest close since February 13.

"When the Finance Ministry announced a package to increase overaseas investment earlier this month, the yen weakened but the stock shrugged it off, so yen bonds were supported by buying on dips. But this time, the stock jumped, and it hit yen bonds badly," the analyst said.

This morning, the dollar rose briefly above 99 yen for the first time in six months, up sharply from middle of the 94 yen level seen in late Tokyo on Tuesday.

The dollar's further gains against the yen overnight were triggered by concerted dollar-buying intervention led by the US Japanese and German central banks.

The key September bond futures briefly slid to as low as 116.50, from the day's high at 117.47 Turnover was 56,195 contracts.

But dealers said that although the fact that the US and Germany are supporting the stronger dollar had an impact on the yen bond market, and no major chart point is seen on the downside of the key September futures, it is yet too early to change the outlook of the Japanese economy, dealers said.

"The market's basic prospect of the economy has not changed yet," the analyst also said.

Institutional investors are also still cautious about correcting their investment stance largely, dealers said.

"The bond futures fell sharply, but cash bonds did not follow the movements, with no particular selling orders seen from investors," said a securities house dealer.

The benchmark 174th 10-year bonds yielded 3.300 percent at 0750 GMT, against Tuesday's 3.120 percent. Yields ranged between 3.170 and 3.300 percent.-Reuter