Japanese bond yields fall on optimism for Iran war de-escalation

By Junko Fujita

TOKYO, April 1 (Reuters) - Japanese government bond yields fell on Wednesday, as optimism for de-escalation of the Middle East conflict eased concerns over inflation.

The 10-year JGB yield JP10YTN=JBTC fell 2.5 basis points to 2.330%, starting the new fiscal year on a positive note after the benchmark yield hit a nearly three-decade high last week.

The two-year JGB yield JP2YTN=JBTC fell 1 bp to 1.365% and the five-year yield JP5YTN=JBTC fell 2 bps to 1.760%. Bond prices move inversely to yields.

U.S. President Donald Trump said the United States could end its military attacks on Iran within two to three weeks, and Tehran did not have to make a deal as a prerequisite for the conflict to wind down.

The bonds were sold heavily last week, sending the five-year bond yield to a record high, as rising oil prices fanned fears of inflation and the Bank of Japan's early interest hike.

Investors adjusted positions at the end of the fiscal year, which also drove the heavy selloff, strategists said.

"Investors want to rebuild their positions at the start of the new fiscal year, which could boost appetite for super-long bonds as well," said Yuki Kimura, bond strategist at Okasan Securities.

Super-long bonds were not traded in the morning session. Their yields jumped last week as buyers were limited on caution for further selloffs, strategists said.