JGBs rise on Nikkei, solid 30-yr offer

* Bid-to-cover at 30-yr offering highest since June tender

* JGB futures, 10-year JGBs extend gains after the auction

By Masayuki Kitano

TOKYO, Feb 9 - Lead 10-year Japanese government bond futures edged higher on Tuesday, supported by lacklustre equities and solid demand at a 30-year auction.

A dip in Tokyo share prices to a two-month closing low helped bolster demand for JGBs, with bonds extending their gains after the 30-year debt sale attracted the highest demand since a tender in the same maturity in June, market players said.

Fiscal stimulus and other policy measures supported a recovery in the global economy, but now that policymakers are mulling an exit from such steps, equities are starting to struggle, said Jun Fukashiro, chief fund manager at Toyota Asset Management.

"It is like walking a tightrope, and I think we are still in a situation where bonds tend to be bought when equities stall," he continued.

March 10-year JGB futures rose 0.23 point to 139.33 <2JGBv1>.

The benchmark 10-year JGB yield dipped 1.5 basis point to 1.340 percent <JP10YTN=JBTC>, pulling away from a three-month high of 1.380 percent hit last week.

The 10-year yield briefly touched an intraday low of 1.335 percent after the 30-year auction.

The finance ministry's 600 billion yen auction of 30-year JGBs attracted bids totalling 3.87 times the amount of accepted offers.

That was up from 3.53 times at the previous 30-year bond offering in December, and matched a level hit at an auction held last June.

The 30-year JGB yield was flat on the day at 2.315 percent <JP30YTN=JBTC>. The 30-year yield hit an intraday low of 2.300 percent after the auction results were announced, but later pulled up from that trough.

The two-year/30-year yield spread was steady on the day at 216 basis points, just off a four-year high of 216.5 basis points reached last week.

In the stock market, the benchmark Nikkei share average dipped 0.2 percent to a two-month closing low.

Ahead of Japan's fiscal year-end at the end of March, there are some concerns that further falls in the Nikkei could prompt investors to book profits in JGBs.

Fukashiro at Toyota Asset Management said that while the chances of such profit-taking in JGBs taking place before the end of March could not be ruled out, such needs were unlikely to be very strong at current Tokyo share prices.

The Nikkei finished at 9,932.90 on Tuesday, up about 22 percent for the current 2009/10 fiscal year that started in April 2009.