JGBs fall on US econ outlook, but yields seen capped

* JGBs fall on improved outlook for US economy

* Investors look for bargains in longer maturities

* Benchmark yield seen staying below 1.3 percent -analysts

By Akiko Takeda

TOKYO, March 4 (Reuters) – Japanese government bond yields
rose on Friday on an improved outlook for the U.S. economy, but
Japan’s fragile economy is likely to keep the benchmark 10-year
yield below a 10-month peak hit last month.

JGBs took cues from a rise in U.S. Treasuries yields and
shares worldwide, but players were reluctant to bet on further
increases ahead of the U.S. jobs report for February due later in
the day.

March 10-year futures (2JGBv1: Quote, Profile, Research) were down 0.19 point at
139.35, after falling as low as 139.19.

Futures dropped to their lowest in almost two weeks at one
stage and broke below their 25-day moving average, which came in
at 139.28 on Friday.

In cash bonds, the benchmark 10-year yield (JP10YTN=JBTC: Quote, Profile, Research) was
up 0.5 basis point at 1.295 percent, after hitting a two week
peak of 1.315 percent and approaching a 10-month high of 1.350
percent struck last month.

The five-year yield (JP5YTN=JBTC: Quote, Profile, Research) rose 1.0 basis point to
0.540 percent.

The 30-year yield (JP30YTN=JBTC: Quote, Profile, Research) was up 1.0 basis point at
2.220 percent, as investors were reluctant to bid ahead of a
30-year bond auction next Tuesday.

But the 20-year yield (JP20YTN=JBTC: Quote, Profile, Research) was flat at 2.045
percent with the bonds faring better than other sectors as
investors such as insurers and pension funds snapped up longer
maturities after the yield curve steepened the previous day.

Some analysts said the yields of superlongs might go up with
rises in yields abroad.

“The yen bond yield curve is likely to steepen as the yields
of superlongs may rise further along with those abroads,” said
Koji Ochai, senior market economist at Mizuho Investors
Securities.

“But rises in short and medium-dated yields should be limited
as the Bank of Japan is unlikely to end its loose monetary policy
anytime soon, even if other central banks raise rates.”

The yields of U.S. Treasuries were stuck near two-week highs
in Asia on Friday. They were seen rising more if data points to a
further recovery in the U.S jobs market later in the day. [US/]

Strong figures from private payrolls processor ADP on
Wednesday raised hopes that Friday’s jobs report could be
stronger than economists’ forecasts.

The U.S. Labor Department will release the report at 1330
GMT. Economists in a Reuters survey forecast that 185,000 jobs
were created in the month compared with 36,000 jobs created in
January.

Japan’s Nikkei average (.N225: Quote, Profile, Research) gained 1 percent, buoyed by
Wall Street’s gains on expectations for a big rise in U.S.
payrolls and a weaker yen. [.T]
(Reporting by Akiko Takeda; Editing by Joseph Radford)