TOKYO, Aug 26 (Reuters) - Japan's 10-year bond yield hit

a 17-year high on Tuesday, as the market weighed upward pressure

on super-long bond yields, which rose to record high levels in

recent months.

Yields across the curve are seen rising in coming sessions

as the market has revived bets that the Bank of Japan will

resume its interest rate hike cycle, while the nation's

financial health could weaken depending on the fate of Japan's

political leadership.

The 10-year Japanese government bond yield

hit 1.62%, its highest level since October 2008, and was last

flat at 1.615%.

There is a persistent upward pressure on yields on

super-long bonds, as some players have been selling bonds with

maturity of 25 years, fund managers said.

Those bonds were probably sold by life insurers, which want

to book losses ahead of the end of their first half of the

business year, said Ryoma Nagatomo, a senior fund manager at

Norinchukin Zenkyoren Asset Management.

The sell-off of loss-making bonds is possible now because

investors can cover the losses from bonds with profits from

Japanese stocks, which rose sharply to record high levels this

month, fund managers said.

Yields move inversely to prices.

On Tuesday, the finance ministry held a liquidity

enhancement auction for the bonds with remaining maturities of

between 15.5 years and 39 years.

The demand was weak, but the market shrugged off the

outcome. The 20-year bond yield fell 1.5 basis points to 2.63%,

retreating from a session high of 2.65%.

The five-year yield was flat at 1.155%.

The 30-year JGB yield fell 1.5 bps to 3.195%.

The two-year JGB yield inched up 0.5 bps to

0.87%.

The 40-year JGBs had not been traded as of 0543 GMT.