TOKYO, June 4 (Reuters) - Benchmark Japanese government

bond yields sank on Tuesday as robust demand at an auction of

the securities added to pressure from lower U.S. Treasury

yields.

The 10-year JGB yield dropped 2.5 basis

points (bps) to a one-week low of 1.035% as of 0500 GMT.

Measures of demand improved markedly at the sale of 2.6

trillion yen ($16.64 billion) of the notes, with the

bid-to-cover ratio rising to 3.66 from 3.15 at the previous

auction last month.

Meanwhile, equivalent U.S. Treasury yields

continued to wallow near the two-week trough reached overnight

after more weak macro data boosted bets for Federal Reserve

policy easing this year.

Japan's benchmark yield reached a 13-year peak of 1.1% on

Thursday, owing to both a climb in overseas yields and building

bets for some kind of hawkish policy shift, or a sign of one

being imminent at the Bank of Japan's two-day meeting ending

June 14.

The BOJ raised rates for the first time since 2007 in March,

and last month unexpectedly cut the amount of bonds it offered

to buy at a regular purchase operation.

"The firm outcome of the auction may slow down fast-pitched

rises in yields, but the fundamental issue - which is the future

direction of the Bank of Japan's regular bond buying amounts -

remains unclear," said Takahiro Otsuka, senior fixed income

strategist at Mitsubishi UFJ Morgan Stanley Securities.

"That will cap gains in bond prices at least until the BOJ's

policy meeting this month."

Benchmark 10-year JGB futures rose 0.28 yen to

143.44.

The two-year JGB yield fell 1.5 bps to 0.385%,

and the five-year yield slid 2.5 bps to 0.605%.

The 20-year yield and 30-year yield

ease lost 1 bp to 1.870% and 2.235% respectively.

($1 = 156.2600 yen)