JGB futures hit 6-1/2-mth low on economic optimism

* Futures fall to lowest since Oct. 22

* Bargain-hunting helps limit losses in cash bonds

* Super-long bonds slip before Thursday's 40-year auction

TOKYO, May 13 - Japanese government bond futures hit their lowest in more than six months on Wednesday as some investors trimmed their holdings of safe-haven government debt on optimism the worst of the global economic slump is over.

The fall in futures was likely exacerbated by selling by trend-following commodity trading advisers (CTAs) that picked up pace when the lead contract neared its previous 2009 low, an important technical level.

Dealers' hedging against the Ministry of Finance's 40-year JGB auction on Thursday also helped push down bonds with maturities of more than 10 years.

But losses were limited as most market participants remained unconvinced the global economy was about to make a vigorous recovery.

"Investors hunted for bargains when the 10-year yield rose above 1.45 percent, supporting the overall market," said Tatsuo Ichikawa, a senior rates strategist for RBS Securities.

June 10-year JGB futures slipped 0.24 point to 136.50 after falling to 136.30, the lowest since Oct. 22. The previous 2009 low was 136.43.

Traders said short-term speculators may have sold futures on an opinion story in the Financial Times that touched on the risk of the United States losing its triple-A credit rating and refocused attention on rising U.S. debt issuance.

"The cash bond market showed muted reaction to the opinion piece as the risk of Treasuries having their rating downgraded is nothing new," said a bond trader at a Japanese brokerage.

The yield of the new benchmark No.300 10-year JGB rose 1.5 basis points to 1.450 percent after touching 1.455 percent. The 10-year yield has traded in a 1.395-1.490 percent range for just over a month.

Analysts and traders said this was likely to last for another month as the Japanese stock market is expected to keep a firm tone for a while as signs that the economy has hit bottom start to emerge, keeping investors hesitant to buy JGBs aggressively.

The Nikkei average gained 0.5 percent on Wednesday, inching back towards a six-month closing high struck earlier in the week.

At the same time, JGBs will likely draw support from expectations it will take time before the Bank of Japan starts to raise interest rates from the current 0.1 percent.

The two-year yield dipped 1 basis point to 0.375 percent, while the five-year yield rose 0.5 basis point to 0.845 percent.

The 20-year yield rose 2.5 basis points to 2.095 percent, while the 30-year yield climbed 2 basis points to 2.230 percent.

The MOF will sell 200 billion yen ($2.1 billion) of 40-year JGBs on Thursday.

The debt sale is regarded as a test of demand for longer-dated bonds, which have been hit the hardest by growing economic hopes, as well as jitters over an expected spike in JGB issuance in coming months.

The spread between two- and 20-year bond yields hit a three-year high of 174.5 basis points on April 20. The spread widened 3.5 basis points to 172 basis points on Wednesday.

The MOF said last month it would issue an extra 16.9 trillion yen of JGBs this fiscal year to pay for economic stimulus, with the extra issuance due to come to the market starting in July.

Data showed on Wednesday that Japan's service sector sentiment rose in April for a fourth consecutive month as the government's plan to hand out one-time payments to citizens and tax breaks for environment-friendly cars boosted sentiment.

The Cabinet Office said that although economic conditions are severe, the deterioration seems to be coming to an end.