TOKYO, Sep 13 (Reuters) Japanese government bond futures fell on Thursday, retreating from 19-month highs, as investors took their cues from a rise in share prices and a slide in U.S.
Treasuries the previous day.
Some investors locked in profits as they felt bond prices have risen to levels where they no longer look attractive, given a drastic rally since August.
But losses were limited as expectations that the U.S. Federal Reserve will go for a hefty rate cut next week to prevent a credit squeeze from hurting the economy and that the Bank of Japan will stand pat for the rest of the year underpinned bond prices.
''Given low yield levels, investors generally are reluctant to buy aggressively,'' said Chotaro Morita, chief fixed-income strategist at Deutsche Securities.
''On the other hand, it is also true that many investors are looking for a chance to buy when bond prices fall,'' Morita said.
Activity was subdued as Japanese Prime Minister Shinzo Abe unexpectedly said on Wednesday that he was stepping down, increasing political uncertainty and keeping investors on the backseat.
December futures fell 0.18 point to 136.15. They climbed as high as 136.41 on Wednesday, the highest since February last year as the lead contract.
The benchmark 10-year yield rose 1.5 basis point to 1.520 percent, hovering near a 19-month low of 1.500 percent on Monday.
The Ministry of Finance re-offers about 100 billion yen (6 million) in 20-year Japanese government bonds in special auctions aimed at relieving a supply crunch in the secondary market.
The auction is not expected to make a big impact on the market.
The Nikkei share average climbed 0.5 percent in early trade, recovering a part of losses made in the previous session after Abe's resignation announcement.
Treasuries fell for a second day on Wednesday as market players booked profits from a rally fuelled by speculation that the Fed could lower interest rates by a half-point next week.
Reuters SZ VP0730