Super-long JGB yields retreat on speculation of further issuance cuts

• Finance minister says will carry out appropriate debt management while talking with market
• Nikkei reported that finance ministry surveyed dealers on reducing issuance
• Japan's 30-year yield rose to fresh record high on Wednesday

TOKYO, Aug 29 (Reuters) - The longest-dated Japanese government bond yields pulled back further from record highs on Friday following a report that the Ministry of Finance is considering further reducing issuance of such debt.

The finance ministry has sent out surveys to primary government bond dealers to get their views on a potential reduction in the issuance of ultra-long-term bonds, Nikkei reported on Thursday, citing multiple market sources, ahead of a meeting of primary dealers next month.

Japanese Finance Minister Katsunobu Kato said on Friday that his ministry will continue to engage with bond market participants and carry out appropriate debt management policies.

The 30-year JGB yield JP30YTN=JBTC sank 2.5 basis points to 3.19%, falling for a second day after pushing to an all-time peak of 3.235% on Wednesday. Bond yields rise when prices fall.

The 20-year yield JP20YTN=JBTC eased 1 bp to 2.615%, after reaching a 26-year top last week at 2.665%.

The 10-year yield JP10YTN=JBTC was flat at 1.615%, stabilizing after rising to a 2008 high of 1.36% on Wednesday.

The stakes for an already closely watched 30-year bond auction set for September 4 rose markedly following an unexpectedly soft two-year auction result on Thursday, with a gauge of demand dropping to the lowest since 2009.

A regular Bank of Japan bond purchase operation on Wednesday also revealed weakness in the super-long sector, despite relatively robust results for shorter maturities.

Long-dated bonds have suffered this year amid a dearth of buyers, with life insurers, in particular, retreating after steady purchases in previous years to fulfill new regulatory requirements, which have now been met.

At the same time, the Bank of Japan's quantitative tightening is steadily reducing the central bank's support for prices across maturities.

The finance ministry reduced super-long bond issuance in July to help address supply-demand imbalances following a surge in yields to then-record highs.

However, after a period of calm, long-dated yields began rising again around an upper house election that saw Japan's ruling coalition lose its majority as support grew for opposition parties pushing for deficit-financed consumption tax cuts.

"A decision to further taper issuance of super-long JGBs might - like the previous reduction - help stabilize super-long rates to some extent in the short term," Mizuho Securities' senior market economist, Yusuke Matsuo, wrote in a client note.

"However, the domestic political situation is now more turbulent than when the last cuts were made, and there are also a variety of fiscal risk factors," he said.

"Even if issuance is tapered, the upward pressure on super-long rates is likely to warrant caution for the foreseeable future."

In shorter-dated JGBs on Friday, the five-year yield JP5YTN=JBTC was flat at 1.155%, while the two-year yield JP2YTN=JBTC ticked up 0.5 bp to 0.875%, a five-month peak.