TOKYO, May 13 (Reuters) - Japan's 10-year government

bond yield jumped to a fresh 29-year high on Wednesday as

inflation worries returned after oil prices rose overnight and

as market players weighed supply of new bonds in the coming

weeks.

The 10-year JGB yield rose 4 basis points

(bps) to 2.580%, its highest since May 1997. The jump came after

an auction of bonds with same maturity on Tuesday saw moderately

firm demand.

"Demand at the auction was stronger than market expectation,

but it is questionable whether that was based on real needs as

there was a significant number of unidentified bids," said

Shuichi Osaki, a senior portfolio manager at Meiji Yasuda Asset

Management.

"Market players are cautious about betting on bonds ahead of

a series of auctions this month."

The finance ministry will hold a 30-year bond auction on

Thursday, followed by a five-year bond auction on Friday. It

will hold a 20-year bond auction on May 20 and a 40-year bond

auction on May 28.

Oil prices rose for a third straight day on Tuesday as hopes

faded for a Middle East peace deal to get ships moving through

the Strait of Hormuz.

Bonds with other maturities had not been traded, as of 0042

GMT.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu)