TOKYO, May 20 (Reuters) - Japanese government bond (JGB)

yields held near multi-decade and record highs on Wednesday

before a sale of 20-year securities tests a nervous debt market.

The benchmark 10-year JGB yield edged 0.5

basis point (bp) lower to 2.795% after rising for seven straight

days to a 29-year peak on Tuesday.

The yield on the 40-year JGB, Japan's longest

tenor, reached a record high of 4.395% in the prior session.

Yields move inversely to bond prices.

Persistent inflation fears tied to elevated oil prices and

the Iran war have been the key driver of a selloff in global

bonds. U.S. Treasuries and German bunds extended falls

overnight.

Japan's Ministry of Finance will sell about 700 billion yen

($4.40 billion) in 20-year bonds later in the day. The yield on

the 20-year JGB climbed to 3.8% on Tuesday, the

highest since August 1996.

"The sharp rise in the JGB term premium has coincided with

an increase in the inflation risk premium," Barclays analysts

Ayao Ehara and Shinichiro Kadota said in a report. "We expect

weak auction results as our baseline scenario."

Japan's fiscal outlook also added pressure, with

expectations for increased JGB issuance tied to the government's

planned extra budget.

The Bank of Japan's hawkish messaging has

fuelled speculation of a rate hike at the June meeting. Governor

Kazuo Ueda on Tuesday acknowledged the rapid rise in long-term

rates and pledged to monitor the JGB market closely.

Meanwhile, Japan's stronger-than-expected first-quarter

gross domestic product growth of 2.1% annualised has reinforced

views that the economy may withstand higher borrowing costs.

The two-year yield, the one most sensitive to

BOJ policy rates, stood at 1.44%, the highest since May 1995.

The five-year yield was steady at 2.025% after

reaching an all-time high on Monday.

($1 = 159.0400 yen)

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