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JGBs edge down, yield curve flattening halts

TOKYO, June 23 (Reuters) - Japanese government bond prices dipped across the board on Friday, with days of flattening in the yield curve partially reversed following weak results at the Bank of Japan's regular debt-buying operation.

The five-year yield was up half a basis point at a six-month high of minus 0.070 percent.

The benchmark 10-year yield also rose half a basis point, to 0.055 percent.

The 30-year yield climbed 1.5 basis points to 0.795 percent, pulling away from a near two-month low of 0.780 percent plumbed on Thursday.

The BOJ on Friday offered to buy 100 billion yen ($898.4 million) of JGBs with maturities exceeding 25 years and the bid-to-cover ratio rose to 4.5 from around 3 at the previous auction.

The higher bid-to-cover ratio showed that there were more investors willing to sell super long JGBs compared with last week, when the previous operation was conducted.

The price rise by super long JGBs this week was in turn seen to have made the maturities more vulnerable to selling by investors.

The five-year/20-year JGB yield spread stood at 63.5 basis points from Thursday's 62.5 basis points, which was its narrowest since December.

The JGB yield curve tracked the flattening of the U.S. yield this week, although domestic factors also played a role as short to medium term yields rose to multiple-month highs.

Short-to-mid-term JGB yields have edged up slowly but steadily over the past few months as the central bank has trimmed the amount of bonds of these maturities it buys.

The BOJ has been cutting back its buying of bills and shorter-dated debt at regular JGB-buying operations in an attempt to improve market liquidity, which had practically dried up under its extensive easing scheme.

The yield rise, however, has been taken in stride within the JGB market.

"The five-year yield may have risen but a sudden spike appears unlikely at the moment, as the 10-year yield further down the curve is anchored near zero percent under the BOJ's policy," said Naomi Muguruma, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

($1 = 111.3100 yen) (Reporting by the Tokyo markets team; Editing by Jacqueline Wong)