* Govt bonds hammered by US rescue of fallen mortgage
giants
* Yen suffers as risks reduced by prop to US housing market
* Financial crisis wears on, analysts say
(Repeats to additional subscribers with no change to text)
By Kevin Plumberg
HONG KONG, Sept 8 (Reuters) - Asian stocks jumped nearly 3
percent and government bonds tumbled on Monday after Washington
took over Fannie Mae and Freddie Mac to save the U.S. housing
market and limit the extensive damage of the financial crisis.
The yen fell against major currencies as the rescue of the
top mortgage finance companies, possibly the biggest U.S.
government bailout ever, was seen helping investors'
willingness to take risks.
Still, the impact of the rescue package on the U.S.
government's fiscal position could ultimately hurt the U.S.
dollar, some analysts said, a prospect that helped to send
Treasury yields higher.
"You do take some of default risk out of the market, so in
that sense this is good for other financial assets. You have
reduced systemic default risk," said Paul Schulte, regional
strategist with Lehman Brothers in Hong Kong.
"Longer-term we have a lot more glass to crawl over because
we have arrangements with other financial institutions that
need to get worked out," he said.
Japan's Nikkei share average <> rose 2.9 percent,
bouncing from a 5-1/2-month low on Friday. Beaten down shares
of exporters such as Canon Inc <7751.T> and Honda Motor Co
<7267.T> led the index higher.
The MSCI index of Asia-Pacific stocks traded outside of
Japan <.MIAPJ0000PUS> was up 2.7 percent, also rebounding from
the lowest since October 2006.
South Korea's KOSPI <> climbed 3.5 percent after
ending on Friday at the lowest since March 2007 while
Australia's S&P/ASX 200 <> rose 3.2 percent.
YEN RETREATS
Dealers in the currency market scrambled to sell yen for
just about every major currency after last week knocking down
the euro to the lowest in a year against the yen because of
fears the global economy was slowing rapidly.
The euro jumped to 155.35 yen <EURJPY=R>, up 1 percent from
late in New York on Friday and shot as high as 156.93 yen on
trading platform EBS.
The dollar climbed 0.7 percent to 108.55 yen <JPY=> and was
as high as 109.05 earlier in the morning.
The U.S. government on Sunday seized control of mortgage
finance companies Fannie Mae <FNM.N> and Freddie Mac <FRE.N>,
which own or guarantee half of all U.S. mortgages, ending weeks
of speculation after regulators judged the companies' shrinking
capital position left them too vulnerable. []
As part of the plan, the Treasury is taking an equity stake
in the companies and promised to purchase mortgage-backed
securities they issue and provide however much liquidity is
necessary to keep them afloat -- actions that together could
top $200 billion.
Citigroup analysts said the longer Washington increases its
debt by figuring a way out essentially to restructure the
housing market, the more the dollar and U.S. assets in general
are seen in a negative light.
"This stops well short of the "nightmare scenario where
foreign investors start to sell the stock of their U.S.
holdings, triggering a U.S. dollar collapse, but represents
another factor arguing against more dollar-favorable capital
flows," the analysts said in a note.
U.S. Treasuries fell sharply in reaction to the Fannie and
Freddie bailout. Benchmark 10-year Treasury prices fell,
pushing up yields to as high as 3.90 percent <US10YT=RR>, up
from 3.71 percent in late U.S. trading on Friday.
Japanese government bond futures fell, following a slide in
U.S. Treasuries and a surge in equity markets. September
10-year futures <2JGBv1> slumped 0.80 point to 137.88 at the
open and extended losses to as low as 137.43, down 1.25 points.
They hit a five-month peak of 139.09 on Friday.
(Editing by Lincoln Feast)
