JGBs edge up as Treasuries extend gains after auctions

* Treasuries extending rally, sagging Nikkei support JGBs

* Super long JGBs weighed ahead of 20-yr tender on Weds * Some focus on whether BOJ will discuss JGB rule at meeting

By Shinichi Saoshiro

TOKYO, June 15 (Reuters) - Japanese government bond prices edged up on Monday, buoyed after U.S. Treasuries extended gains following the successful absorption of new debt the previous week and as Tokyo's Nikkei stock average .N225 sagged.

U.S. Treasuries rallied on Friday, pulling benchmark yields further back from eight-month highs above 4 percent, as investors were relieved that the market managed to absorb $65 billion of new debt over the week. [US/]

Analysts said the focus of JGB investors was likely to remain on Treasuries with trading factors in Japan limited this week.

"JGB futures are moving in range due to limited incentives, while cash JGBs of longer maturities are weighed ahead of the 20-year auction," said Tatsuo Ichikawa, a senior fixed-income strategist at RBS Securities.

Japan's Ministry of Finance will offer 900 billion yen ($9.2 billion) of 20-year bonds on Wednesday, with market participants expecting decent investor demand as the coupon is likely to be raised by 10 basis points to 2.1 percent if current yield levels hold.

September 10-year futures 2JGBv1 advanced 0.20 point to 136.21.

The five-year yield JP5YTN=JBTC fell 1.5 basis points to 0.845 percent.

The 10-year yield JP10YTN=JBTC declined 1 basis point to 1.500 percent after hitting 1.560 percent on Thursday, the highest since Oct. 22.

The 20-year yield JP20YTN=JBTC dropped 0.5 basis point to 2.165 percent and the 30-year yield JP30YTN=JBTC rose 0.5 basis point, to 2.290 percent.

The Bank of Japan begins a two-day policy meeting on Monday, at which the central bank is widely expected to keep interest rates unchanged at 0.10 percent.

"It remains to be seen if the BOJ board discusses changes to the rule that limits the amount of government bonds it can hold," said Ichikawa at RBS Securities.

A self-imposed rule prohibits the central bank from holding more JGBs than the amount of yen notes in circulation.

The rule came into focus after the BOJ increased its outright JGB purchases by roughly a third to 21.6 trillion yen a year in March to cap long-term rates, as Japan boosted its reliance on debt to compile fiscal packages to aid an economy deep in recession.

As of March, the BOJ held nearly 44 trillion yen of JGBs, compared with around 76.9 trillion yen of notes in circulation. Its JGB holdings are estimated to reach the self-imposed limit in about four years following the outright buying boost.

But some have suggested that the BOJ buy even more debt to help the economy, which may result in the central bank having to bend its self-imposed regulation.

Long-term bond yields globally have climbed this year as waves of government debt being issued around the world to finance stimulus measures have raised concerns about the ability of markets to handle the issuance glut.

The recent yield rise in U.S. Treasuries has been followed with particular interest.

On Thursday the 10-year benchmark JGB yield rose to an eight-month high after its U.S. counterpart spiked to 4 percent following a lacklustre 10-year tender and news that Russia will reduce the share of Treasuries in its gold and forex reserves. [ID:nLA1053033]

The Nikkei lost 0.7 percent on Monday as investors searched for more signs that economic recession may be easing. [.T] (Editing by Joseph Radford)