Japan's 20-year yield edges up before first super-long bond auction since election

By Junko Fujita

TOKYO, Feb 19 (Reuters) - Japan's 20-year bond yield edged higher on Thursday with investors cautious ahead of the first auction of the debt since reflationist Prime Minister Sanae Takaichi's resounding election win earlier this month.

The 20-year Japanese government bond (JGB) yield JP20YTN=JBTC rose 1 basis point (bp) to 2.98%, reversing an decline of 0.5 bp earlier in the session. Yields rise when prices fall.

So-called super-long JGB yields have been declining since Takaichi's Liberal Democratic Party won a majority in snap lower house elections on February 8, aside from a knee-jerk rise on the day after the poll results to take the 20-year yield as high as 3.165%.

Strategists say the decline in yields is partly due to low liquidity for the longest-dated JGBs.

"Yields have fallen sharply but there are still concerns about the nation's fiscal health," said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.

"A move of 10 basis points in a bond yield says very little about its fundamentals" in the current market environment, Inadome said. "It is hard to bet actively on the 20-year bonds at this auction."

A five-year JGB auction on Tuesday met weak demand, but fell in the session to a one-month low amid thin market conditions due to Lunar New Year holidays in many regional markets outside of Japan, and a U.S. holiday on Monday.

Investors initially balked at Takaichi's pledge a month ago to suspend the sales tax on food for two years, sending the 20-year yield to an all-time high of 3.46% on January 20 as bonds sold off aggressively.

Foreigners have been aggressively buying Japan's super-long-dated bonds in recent monts after the record sell-off made the bonds cheap.

Meanwhile, the 10-year JGB yield JP10YTN=JBTC rose 1 bp to 2.145% on Thursday, and the 40-year yield JP40YTN=JBTC fell 2 bps to 3.585%. Other tenors had yet to trade.