JGB futures dip as stocks bounce, deflation supports

TOKYO, Sept 29 - Japanese government bond futures dipped on Tuesday as Tokyo's Nikkei stock average gained 0.9 percent after sliding to a two-month low the previous day, but losses were limited by the latest indication of deepening deflation.

* Data released on Tuesday showed Japan's core consumer prices fell a record 2.4 percent in August from a year earlier.

* Gains by U.S. Treasuries the previous day, when the 30-year Treasury bond yield declined to a four-month, also limited JGB losses.

* Market focus was on the 2.4 trillion yen ($26.7 billion) two-year JGB auction later in the day. Although the coupon is expected to be set at 0.2 percent, the lowest in four years, analysts expect ample demand from banks due to the Bank of Japan's easy monetary policy and deflationary pressures.

* December 10-year JGB futures dipped 0.02 point to 139.29 after hitting 139.40, their highest since Sept. 3.

* The two-year yield rose 1 basis point to 0.230 percent.

* The Nikkei gained after the yen pulled back from eight-month lows against the dollar.