TOKYO, Oct 10 (Reuters) - Japanese government bond

yields rose on Thursday, tracking U.S. Treasury yields higher,

as the market braced for a further rise in yields after a key

U.S inflation report later in the day.

The 10-year JGB yield rose 2.5 basis points

(bps) to 0.955%, its highest level since Aug. 2. The five-year

yield rose 1.5 bps to 0.56%, also the highest

since Aug. 2.

U.S. Treasury yields rose on Wednesday in volatile trading,

as investors continued to price in a less aggressive monetary

easing cycle from the Federal Reserve, with gains further

boosted by a weaker-than-expected auction of 10-year notes.

Japanese finance ministry's auction for the five-year bonds

earlier in the session was relatively strong but that did not

lift investor sentiment.

"The market was carefully awaiting the U.S. inflation data.

If the data is strong, the U.S. yields could rise further," said

Naoya Hasegawa, chief bond strategist at Okasan Securities.

Since a blowout employment report last week, bets of a large

50 basis points cut in November have been completely priced out,

with 85% of bets now on a 25 bps cut.

The two-year JGB yield rose 0.5 bp to 0.405%.

The 20-year JGB yield rose 3 bps to 1.75%.

The 30-year JGB yield rose 3.5 bps to 2.185%.

The 40-year JGB yield rose 5 bps to 2.495%.