TOKYO, May 21 (Reuters) - Japanese government bonds

(JGBs) rose for a second straight day on Thursday, tracking

gains in global debt markets and as investors seized on a run-up

in yields to historic levels.

The yield on the 10-year JGB eased 3.5 basis

points (bps) to 2.750%, retreating further from a 29-year high

scaled earlier in the week. The yield on the 30-year JGB

dropped 8.5 bps to 4.015%. Yields move inversely

to bond prices.

Yields across the JGB curve jumped to record and

multi-decade highs earlier this week as inflation concerns

mounted, bets for a rate hike by the central bank solidified,

and expectations grew that the government will use debt to pay

for a supplementary budget.

U.S. Treasury yields fell sharply overnight after President

Donald Trump said peace deal talks with Iran were in their final

stage. A solid 20-year JGB auction in the prior session also

helped allay concerns that inflation would erode appetite for

longer-dated bonds.

"The significant rise in super-long-term government bond

yields created a perception of undervaluation, attracting solid

demand," Sony Financial Group senior economist Takayuki Miyajima

said in a note.

"Given that expectations of an early rate hike are already

largely priced in, the market is likely to remain nervous as it

continues to monitor crude oil prices and developments in fiscal

and monetary policy."

Highlights for JGB investors on Thursday include scheduled

speeches by a Bank of Japan board member as well as a meeting

between the government and bond market participants, he added.

The two-year yield, the one most sensitive to

Bank of Japan policy rates, eased 0.5 bp to 1.445%. The

five-year yield fell 1 bp to 2.025%.

(Reporting by Rocky Swift in Tokyo; Editing by Subhranshu Sahu)