JGB investors cautious ahead of week's auctions

TOKYO, Nov 9 (Reuters) - Japanese government bond futures held just above a three-month low on Monday, with investors cautious ahead of two debt auctions this week after fiscal worries led to only lukewarm support for a sale last week.

* Gains by U.S. Treasuries and losses by Tokyo stocks in response to a jump in October U.S. unemployment supported JGBs.

* But the JGB market was cautious ahead of a 40-year tender on Tuesday and a five-year sale on Thursday after an auction of 10-year bonds the previous week drew lukewarm demand due to investor concerns over a potential supply increase due to a government deficit blow-out.

* The five-year auction will be in the spotlight, since it will be the first to be carried out with an increased issuance amount. The ministry is increasing the monthly issuance amount of five-year debt by 100 billion yen to 2.4 trillion yen.

* The ministry said last month it would increase its issuance of JGBs to the market through regular auctions by 2.1 trillion yen to 132.3 trillion yen for this fiscal year, to offset weak demand for JGBs among retail investors. [ID:nT78079]

* Investors are bracing for the possibility of further increases in debt issuance this fiscal year to offset an expected tax revenue shortfall. They are also awaiting details on the size of debt issuance for fiscal 2010/11, which starts next April. [ID:nT259930]

* Analysts estimate that debt issuance to the market through regular auctions may rise to between 142 trillion yen and 144 trillion yen in fiscal 2010/11, or possibly higher.

* The cost of insuring against default in government debt has risen to its highest level since April. Five-year credit default swaps JPGV5YJPAC=MP on Japan's sovereign debt has risen to about 66 basis points from about 43 basis points two-weeks ago, although they are still below a record of 130 touched in February.

* December 10-year JGB futures 2JGBv1 inched up 0.01 point to 137.57, pulling away from a three-month low of 137.47 struck on Friday.

* The benchmark 10-year yield JP10YTN=JBTC was unchanged at 1.445 percent after hitting a three-month high of 1.455 percent on Friday. (Reporting by Shinichi Saoshiro; Editing by Rodney Joyce)