JGB 10-yr yield rises to 7-mth high on stock gains

* JGB 10-yr yield climbs to 1.545 pct, highest since Oct

* Overseas yield rise and supply worries remain strong

* Investors eye U.S. Treasuries before Bernanke testimony

By Satomi Noguchi

TOKYO, June 3 (Reuters) - The yield on Japan's benchmark 10-year government bond rose to its highest in more than seven months on Wednesday as steady gains in Tokyo shares this week have reduced buying of safe-haven debt.

A late fall in U.S. long-term yields the previous day eased concerns that a global yield rise will also hit Japan and gave early support to JGBs.

But worries about a debt supply boost starting next month to fund Japan's latest economic stimulus package remained strong and kept upward pressure on the 10-year yield in subdued trade, analysts said.

"The market cannot ignore the psychological impact from moves in U.S. Treasuries," said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Securities.

"The trading range of the 10-year yield looks to have risen above or around 1.5 percent now, whereas the level worked as a resistance before," Inadome said.

U.S. Treasuries rose on Tuesday in part spurred by traders covering short positions in advance of Wednesday's Treasury purchase operations by the Federal Reserve, along with Fed Chairman Ben Bernanke's testimony in Congress.

JGB investors largely stayed on the sidelines to see if the spike in long-term Treasury yields will halt soon after the recent market sell-off that had shot the benchmark 10-year Treasury yield to 3.75 percent, the highest since November.

The yield of the new JGB benchmark 10-year note auctioned the previous day was up half a basis point at 1.540 percent JP10YTN=JBTC after rising as high as 1.545 percent earlier, the highest since October 2008.

The yield rise stemmed partly from the fact that the new 10-year note redemption is three months later than the previous benchmark, traders said.

June 10-year futures rose 0.09 point to 136.39 2JGBv1, off last week's low of 136.02, their lowest in more than 7 months.

The 20-year yield dipped a basis point to 2.180 percent JP10YTN=JBTC, off the earlier high of 2.190 percent that matched Tuesday's peak, the highest since late October.

The two-year yield edged down half a basis point to 0.355 percent JP2YTN=JBTC.

The spread between the two- and 20-year yields remained close to the widest in 3-½ years of 183 basis points marked on Tuesday, suggesting the curve steepening trend was intact.

Short-term maturities continued to draw funds from investors such as Japanese banks with expectations that the Bank of Japan will keep interest rates near zero for the foreseeable future.

BOJ policy board member Hidetoshi Kamezaki said on Wednesday the central bank should take more steps if needed for the economy. [ID:nTKF106407]

The BOJ has kept its key policy rate on hold at 0.1 percent after having cut it twice since October last year. (Editing by Michael Watson)