TOKYO, May 29 (Reuters) - Yields on Japanese government

bonds (JGBs) fell on Friday following news that the U.S. and

Iran had agreed to extend a ceasefire, though the deal had yet

to be signed.

Benchmark 10-year JGB yields sank 4 basis

points (bps) to 2.655%, and 10-year JGB futures added

0.26 yen to 128.91 yen. Bond yields fall when prices rise.

Washington and Tehran reached an agreement on Thursday to

extend a ceasefire and lift restrictions on shipping through the

Strait of Hormuz, sources told Reuters, though U.S. President

Donald Trump has yet to approve it and Iranian state media said

it had not been finalised.

While market optimism spurred a decline in JGB yields

following similar moves for U.S. Treasuries overnight, "it is

unlikely that the uncertainty in the Middle East will be

completely eliminated, even though the situation is generally

calming down," Mizuho analyst Yuhi Kawano wrote in a report.

The 20-year yield fell 5 bps to 3.575%, while

the 30-year yield declined 4 bps to 3.925%.

At the shorter end, five-year yields lost 1.5

bps to 1.89%.

Two-year yields were an outlier, rising 1.5

bps to 1.365%, but that followed a lacklustre auction of the

debt earlier in the session.