JGBs edge up on Nikkei, 30-year auction eyed

TOKYO, Feb 9 (Reuters) - Japanese government bonds edged up on Tuesday after worries over the worsening fiscal health of some European countries hurt shares and lifted U.S. Treasuries.



* But activity was subdued as many investors retreated to the sidelines, waiting to see if the Nikkei stock average will remain on a downtrend after it hit two-month lows.



* Stock market weakness usually supports JGBs as investors are prompted to seek the relative safety of government debt. But gains are being restrained at the moment on concerns that falls in the Nikkei could force investors to take profits on bond advances ahead of Japan's financial year-end in March.



* 'There is no doubt that factors surrounding the JGB market are favourable to bonds,' said Makoto Yamashita, chief Japan interest rate strategist at Deutsche Securities. 'Yet, JGBs are not gaining as much as they could because it's before the financial year-end.'



* March JGB futures edged up 0.07 point to 139.17, while the benchmark 10-year yield dipped 0.5 basis point to 1.350 percent.



* The Ministry of Finance's 30-year debt auction on Tuesday is in focus. The ministry is selling 600 billion yen ($6.7 billion) of superlong bonds in a reopening of its current No 31 issue and the results will be announced at 0345 GMT.



* The 30-year debt sale is expected to draw decent demand as the 30-year yield has stayed near its five-month highs. It was down 0.5 basis point to 2.310 percent.



* The five-year yield was unchanged on the day at 0.515 percent.



* The Nikkei average hit its lowest in two months on Tuesday, with shares of exporters falling as heightened concerns about the euro zone's sovereign debt troubles continued to hurt investor confidence.



* Longer-dated U.S. Treasuries inched up the previous day on jitters over some euro zone members' fiscal problems, and ahead of a three-year debt auction.



(Reporting by Rika Otsuka; Editing by Joseph Radford)

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