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JGBs drop ahead of 10-year sale with coupon set at 0.8 percent

TOKYO, Oct 4 (Reuters) - Japanese government bonds slipped slightly on Thursday with benchmark yields moving away from an eight-week low touched earlier this week as investors sold to make room in their portfolios for buying at a 10-year sale.

* The Ministry of Finance offered 2.3 trillion yen ($29.3 billion) of reopened 10-year notes with a coupon of 0.80 percent, matching that of the previous three sales.

* "Demand at this sale should be strong, as the 10-year is the most appealing and liquid sector right now," said a fixed-income fund manager at a Japanese asset management firm.

* Since the previous sale, the 10-year yield has fallen and the sector's carry and rolldown is higher relative to other maturities, strategists at Bank of American Merrill Lynch wrote in a note to clients.

"The risk-adjusted expected return of the 10-year sector is getting more attractive as volatility has decreased and the intermediate part of the curve has flattened," they said.

* In cash bond trading, the 10-year yield added half a basis point to 0.770 percent, moving away from the 0.755 percent level touched on Tuesday and Wednesday, which was its lowest level since Aug. 7.

* Ten-year JGB futures ended morning trade down 0.10 point at 144.15, moving away from an eight-week high of 144.33 hit on Wednesday.

* The 20-year bond yield was flat at 1.650 percent while the 30-year yield added half a basis point to 1.910 percent. ($1 = 78.610 Japanese yen) (Reporting by Lisa Twaronite)

((lisa.twaronite@thomsonreuters.com)(81 3 6441 1870 Reuters Messaging: lisa.twaronite.thomsonreuters.com@reuters.net))

Keywords: MARKETS JAPAN JGB/