Japanese government bond prices tumble

By Kevin Plumberg

HONG KONG (Reuters) - Japanese government bond prices dropped on Monday, hit by negative sentiment ahead of auctions this week and with global inflation on the rise, while oil prices held steady above $127 a barrel. Asian stocks edged higher.

Bond yields in the euro zone, Japan and the United States hit 2008 highs last week as investors scrambled to protect their portfolios from inflation with the worst of the credit crisis apparently over.

"With market sentiment still bearish, the supply this week will be a challenge for investors as to how much they can absorb," said Chotaro Morita, chief JGB strategist at Barclays Capital in Tokyo.

Japan's Nikkei share average .N225 was 0.2 percent higher, with Sony Corp (6758.T) one of the biggest gainers after Goldman Sachs upgraded shares in the company to "buy." Technology stocks also boosted Taiwan's TAIEX index , up 0.23 percent.

The MSCI index of shares in the Asia-Pacific region outside Japan .MIAPJ0000PUS added 0.1 percent, while a pan-Asian index rose 0.4 percent .MIAS00000PUS.

Shares in Thailand .SETI were expected to lose ground on Monday after a tense weekend street protest aimed at forcing the government of Prime Minister Samak Sundaravej to step down.

"Foreign investors are queuing up to sell shares as the political turbulence drags on," a dealer at BT Securities said.

Nervousness about an upcoming 10-year note auction in the Japanese government bond market knocked down the cash market on Monday and sent 10-year futures to the lowest since August 2007.