Japan's super-long bonds slide ahead of crucial upper house election

By Junko Fujita

TOKYO, July 8 (Reuters) - Japan's super-long-dated bonds continued to decline on Tuesday as investors evaluated the potential outcome of the upcoming upper house election.

The 30-year JGB yield JP30YTN=JBTC jumped 12.5 basis points (bps) to 3.09%, its highest level since May 23.

The 20-year JGB yield JP20YTN=JBTC touched 2.485%, its highest point since May 26, and was last at 2.475%, up 5 bps from the previous session.

Yields move inversely to bond prices.

"The market is cautious about the outcome of the upper house election. Supporting rates for parties that are calling for fiscal expansion are rising," said Shinichiro Kadota, head of Japan FX and rates strategy at Barclays Securities Japan.

"Policies to be taken after the election are not clear, and investors are worried about what would happen to (Prime Minister Shigeru) Ishiba if his party suffers a crushing defeat at the election," he said.

Investors triggered a heavy sell-off of Japan's super-long bonds on Monday after weekend polls by local media suggested the Liberal Democratic Party and coalition partner Komeito could risk losing their majority in the July 20 election.

The election comes after Ishiba's LDP and junior partner Komeito, which form the ruling coalition, lost their combined majority in the lower house last year.

The yields on those bonds hit their record highs in May on growing concerns about the worsening fiscal condition. The sell-off eased after Reuters reported in the same month that the Ministry of Finance was considering trimming issuance of such bonds.

Bucking the trend, investors bought shorter-dated bonds amid bets that the Bank of Japan will not raise interest rates in the near future.

The two-year bond yield JP2YTN=JBTC slipping 1 bp to 0.72%.

The five-year bond yield JP5YTN=JBTC slipped 1 bp to 0.96% after an auction for the bonds with the same maturity witnessed firm outcome. The yield was last flat at 0.97%.