Benchmark JGB yields hover near 17-year high on fiscal concerns

By Rocky Swift

TOKYO, Aug 20 (Reuters) - Japanese government bonds plunged on Wednesday, sending benchmark yields to match a near 17-year high, after a lacklustre auction and fiscal concerns damped confidence in the market.

Yields on Japan's super-long bonds have soared to historic levels in recent months as concerns mounted about the country's debt levels and a rise in the government's deficit spending.

An auction of 20-year JGBs on Tuesday received bids 3.09 times the amount sold, lower than the 3.15 times seen at the previous auction in July.

The 10-year JGB yield JP10YTN=JBTC rose 1.5 basis points (bps) to 1.605%, a level last touched on July 25 - the highest since October 2008.

Bond yields move inversely to prices.

"The slight weakness in yesterday's 20-year bond auction is likely to have intensified upward pressure on yields," Mizuho Securities analysts said in a note.

"Looking ahead, with concerns about fiscal expansion remaining strong, the ultra-long-term zone as a whole is likely to face upward pressure."

The 20-year JGB yield JP20YTN=JBTC rose 3 bps to 2.630%, hovering near the 2.65% level touched last month that was the highest in 25 years.

The 30-year yield JP30YTN=JBTC surged 5 bps to 3.19%, just below the all-time high of 3.2%.

Japan's Ministry of Defence is compiling a budget request amounting to a record 8.8 trillion yen ($59.69 billion), local media reported on Tuesday. Separately, speculation is growing that Prime Minister Shigeru Ishiba will soon face a leadership challenge from within his own party.

Because of those factors, "the ultra-long-term segment may become increasingly difficult to buy", said Shuichi Ohsaki, senior portfolio manager at Meiji Yasuda Asset Management.

($1 = 147.4400 yen)