JGBs fall on Middle East ceasefire, moderate auction outcome

TOKYO, June 24 (Reuters) - Japanese government bond prices fell on Tuesday as investors weighed a 20-year bond auction outcome and as a ceasefire in the Middle East lifted risk appetite.

The auction of 20-year Japanese government bonds improved from the outcome of the previous auction, which was the worst since 2012, and had triggered a bond sell-off.

But it was not strong enough to show a rebound in demand for super-long bonds, even as the Ministry of Finance announced a plan to cut bond sales, strategists said.

"The outcome was better than the previous auction, but it was the lower end of the expectations," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

"The market was still cautious about the demand for 20-year bonds," he said.

The 20-year JGB yield JP20YTN=JBTC rose 0.5 basis point to 2.345%. The 10-year JGB yield JP10YTN=JBTC rose 1 bp to 1.415%.

Bond yields move inversely to prices.

Tuesday's auction was the first sale of JGBs since the finance ministry announced last week the plan to cut sales of super-long bonds in a rare move to lift demand after super-long bond yields rose to record highs last month.

The ministry plans to cut 20-year JGB issuance by 200 billion yen ($1.4 billion) per sale from July. It would also cut the sales of 30- and 40-year bonds by 100 billion yen at each sale.

"The reduction in sales will apply from next month and the market still has a lot of supplies through this auction," said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities.

Bonds also sold off on Tuesday as investors' risk appetite was boosted after U.S. President Donald Trump said Iran and Israel had agreed to a ceasefire.

Global shares rallied, with the benchmark Nikkei .N225 rising more than 1%.

The two-year JGB yield JP2YTN=JBTC rose 0.5 bp to 0.735% and the five-year yield JP5YTN=JBTC also edged up 0.5 bp to 0.965%.

The 40-year JGB yield JP40YTN=JBTC was flat at 3.130%.

($1 = 145.3900 yen)