JGBs slip as Nikkei surge knocks wind out of rally

* Benchmark yield rises to a 5-month high of 1.200 pct
* Futures hit as CTA selling re-emerges
* Superlongs slip on pre-auction selling

By Shinichi Saoshiro
TOKYO, Dec 2 (Reuters) - Japanese government bonds slid on Thursday, giving back a swathe of gains from the previous day's rally as Tokyo stocks climbed to a fresh five-month high and dulled the appeal of debt.
A slide by U.S. Treasuries in the wake of sturdy economic data also weighed on JGBs, helping force the benchmark yield to a five-month high of 1.200 percent a day after bonds surged in relief over the success of a 10-year auction.

December 10-year futures 2JGBv1 fell 0.39 point to 140.94 after rising nearly half a point the previous day as speculators including commodity trading advisers (CTAs) resumed selling, dealers said.
"I thought the market had found a foothold after yesterday's auction, but it has surrendered gains without much of a fight today," said a fund manager at a domestic asset management firm.

"It underscores soft sentiment as stocks show unexpected resiliency. Investors are willing to bargain-hunt when given the chance but they won't chase yields much lower. The benchmark's 1.200 percent level could become just a passing point, not a barrier."
Others, however, said the bear market could be mostly over with the 10-year yield having risen nearly 30 basis points over the past month.

"The market retreat looks to have mostly run its course with risk reduction by investors going on a lower boil," said Akito Fukunaga, chief fixed-income strategist at RBS Securities in Tokyo.
The 10-year yield JP10YTN=JBTC climbed to a five-month high of 1.200 percent, although bargain-hunting by investors such as regional banks who were late in catching the previous day's post-auction surge helped keep it below that level for now.

The short-end suffered the least losses with the two-year yield JP2YTN=JBTC edging up 0.5 basis point to 0.185 percent. The yield has pulled back from a one-year high of 0.210 percent hit early this week.
Expectations for further central bank easing has ebbed now that the Nikkei share average .N225 has recovered from lows seen in early November and the yen has retreated, driving up two- and five-year yields in the past two months. But market participants said the yield rise also looked like it had gone too far.

Superlongs, on the other hand, sagged on dealers selling to make room for next week's 20-year auction and curve players unwinding flattening positions, traders said.
The 20-year yield JP20YTN=JBTC climbed 3 basis points to 1.995 percent after rising to 2.000 percent, a new 5-½ month high.

The Nikkei .N225 gained 1.8 percent following a surge on Wall Street with talk of bold steps to resolve the euro zone's debt crisis warming investor appetite for riskier assets. 

In focus is the European Central Bank meeting later on Thursday and whether the central bank drops any hints towards expanding its bond buying, further easing concerns towards the euro zone debt crisis. (Editing by Michael Watson).reuters.com