Super-long JGB yields rise after weak auction, reversing earlier declines

TOKYO, June 12 (Reuters) - Long-dated Japanese government bond yields rose briefly on Thursday, reversing earlier declines, following weak demand at a government auction of the debt.

The Ministry of Finance received bids worth 897.8 billion yen ($6.24 billion) and sold 449.8 billion yen of debt in a so-called liquidity enhancement auction for JGBs with 15.5-39 years left to maturity.

The demand was much lower than the previous sale in April, when the finance ministry received 1.555 trillion yen in bids and sold 649.3 billion yen of bonds.

The 20-year JGB yield JP20YTN=JBTC advanced 1.5 basis points (bps) to 2.395% immediately following the announcement of the auction results, before falling again to be down 0.5 bp as of 0423 GMT.

The 30-year yield JP30YTN=JBTC briefly flipped to a 0.5 bp rise but was last 1 bp lower at 2.905%.

"The liquidity supply auction yielded a distinctly lackluster result, underscoring the market's subdued appetite for super-long positions," said Shoki Omori, chief desk strategist at Mizuho Securities.

"Although this outcome was generally within the expected range, it nevertheless highlighted the lingering vulnerability and volatility in the super-long segment."

Yields on 30-year JGBs surged to record highs last month, and 20-year yields spiked to quarter-century peaks, as investors turned skittish on the fiscal outlook for Japan and other developed economies. The rise was exacerbated by reduced appetite for the debt from life insurers and other traditional domestic buyers.

The finance ministry injected some calm into the market with a pledge to adjust the size of super-long JGB issuances, but there are no details on how much the government will pare that back and which shorter-dated tenors will see increased issuance as a result.

JGB yields began the day by falling, tracking overnight moves in U.S. Treasury yields. US/

The 10-year JGB yield JP10YTN=JBTC fell 1 bp to 1.445%.

The five-year yield JP5YTN=JBTC was down 1 bp at 1.005%, and the two-year yield JP2YTN=JBTC was flat at 0.75%.

($1 = 143.9300 yen)