JGB futures hit 3-mth high after U.S. job losses

* Ten-year JGB yield falls to 3-mth low after smooth auction

* Investors await fresh incentives

TOKYO, July 3 - Japanese government bonds rose and futures hit a three-month high on Friday as stocks dropped after bleak U.S. jobs data rekindled worries about the global economy, helping demand for safe-haven government debt.

The benchmark 10-year yield slipped to a three-month low, also underpinned by a smooth auction for the maturity on Thursday despite earlier worries about an increase in the size of the sale.

"Those who held off buying in the last quarter continue to pick up bonds following key events such as U.S. jobs data and the 10-year auction," said Makoto Yamashita, a strategist at Deutsche Securities.

"But as the 10-year yield has fallen to the lower end of 1.3 percent, investors are cautious about buying further," he said.

September futures rose 0.25 point to 138.45 <2JGBv1> after touching 138.50, their highest since late March.

The yield on benchmark 10-year bonds fell 2.5 basis points to 1.330 percent <JP10YTN=JBTC>, its lowest in three months.

Early last month, the 10-year yield climbed as high as 1.560 percent on a spike in U.S. Treasury yields and an uptrend in global stock prices.

But 10-year yields began to fall around mid-June as many investors accelerated bond buying after going slow on purchases earlier in the April-June quarter.

The five-year yield dipped 2 basis points to 0.670 percent <JP5YTN=JBTC>.

The 20-year yield fell 2.5 basis points to 2.005 percent <JP20YTN=JBTC> and the 30-year yield was down 1.5 basis point to 2.170 percent <JP30YTN=JBTC>.

Tokyo's Nikkei share average <.N225> declined 1 percent after data showed on Thursday that U.S. employers cut 467,000 jobs in June, considerably more than expected 363,000 decline, and that the unemployment rate hit the highest in nearly 26 years, underscoring a slow recovery from recession. [ID:nN02549309]

With U.S. financial markets closed on Friday for a public holiday, the market is waiting for fresh incentives, dealers said.

Market participants are looking to key events next week such as the finance ministry's 40-year JGB auction and a series of U.S. Treasury sales.

The Treasury Department announced on Thursday that it would sell $73 billion in longer-dated debt next week. It will sell $35 billion of three-year notes, $19 billion of reopened 10-year notes and $11 billion of indexed 30-year notes, along with $8 billion of 10-year inflation indexed notes. [US/]