TOKYO, Oct 16 (Reuters) Japanese government bonds rose on Tuesday, following gains in U.S. Treasuries, while a fall in domestic share prices prompted investors to shift their funds to bonds.
Treasuries rose on Monday as losses on Wall Street inspired by a weaker financial sector and fresh worries about credit shortages sparked buying of safe-haven government debt.
While there is no major domestic data this week that gives fresh clues on when the Bank of Japan will raise interest rates to 0.75 percent from the current 0.5 percent, bond investors are taking cues from equities markets and Treasuries, analysts said.
''JGBs are tracking movements in Treasuries and domestic share prices,'' said Hidenori Suezawa, chief fixed-income strategist at Daiwa Securities SMBC.
''But JGB yields are not expected to move sharply in either direction as their current levels are neither high enough to prompt aggressive buying nor low enough to spark heavy selling,'' Suezawa said.
The Nikkei share average was down 1 percent in early trade.
Another focus in the market this session is the Ministry of Finance's 600 billion yen ($5.1 billion) auction of 30-year bonds. Given current yield levels, traders expect the coupon to be set at 2.5 percent, up from 2.4 percent from a similar debt sale in July and the highest since the October 2006 issue.
Some analysts said a 2.5 percent coupon should be high enough to lure investor demand, while others were not expecting investors to be in a hurry to pick up longer-dated bonds as there will be 20- and 40-year JGB auctions in the next three weeks.
The MOF announces the auction results at 0345 GMT.
December 10-year futures rose 0.14 point to 134.56, pulling away from a two-month low of 134.14 hit last week.
The benchmark 10-year yield dipped 1 basis point to 1.720 percent, staying below a 2-month high of 1.745 percent struck last week.
The yield of the current 26th 30-year bond was down 0.5 basis point to 2.505 percent. The yield rose as high as 2.510 percent on Monday, its highest level since late July.
The two-year yield slid 0.5 basis point to 0.880 percent.
($1=117.37 Yen) REUTERS CS BST0704