TOKYO, March 17 (Reuters) - Japanese government bonds

rallied on Tuesday, as a recent run-up in yields drew strong

demand at an auction of 20-year securities.

The benchmark 10-year JGB yield fell 1.5

basis points to 2.260%, while the 20-year yield

slid 1 bp to 3.135%. Yields move inversely to bond prices.

Bond yields have been rising around the world as the raging

war in Iran stoked concerns of an economic slowdown and the need

for central banks to cap inflation caused by surging oil prices.

The 20-year yield briefly rose to a five-week high before

the Ministry of Finance's sale of about 800 billion yen ($5.03

billion) in the notes.

The auction's bid-to-cover ratio, a measure of demand, rose

to 3.25, the highest since December 2025. The auction tail was

0.009, near the lowest on record and another positive indicator

for uptake among buyers.

The MoF's plan to reduce issuance of long-term JGBs in the next

fiscal year is expected to shore up demand at debt sales, said

Gen Taniguchi, market analyst at Mizuho Securities.

"These changes should help to tighten up supply/demand in the

super-long sector quite significantly, as could be apparent

confirmation that the MoF intends to keep shortening the average

maturity of its fresh issuance," Taniguchi said in a note before

Tuesday's auction.

The Bank of Japan is widely expected to leave its key interest

rate unchanged at its policy meeting on Thursday.

Still, surging imported energy costs and a weakening yen are

strengthening the case for a quicker pace of rate hikes.

Speaking in parliament, BOJ Governor Kazuo Ueda said underlying

inflation is accelerating toward the bank's 2% target and

reiterated the central bank's readiness to step into the JGB

market if necessary.

The 30-year yield edged 0.5 bp lower to

3.545%. The yield on the 40-year JGB, Japan's

longest tenor, fell 0.5 bp to 3.785%.

The two-year yield, the one most sensitive to

Bank of Japan policy rates, was flat at 1.275%. The five-year

yield fell 1 bp to 1.680%.

($1 = 159.1900 yen)