* Superlongs outperform, flattening the yield curve
* Ten-year JGB futures climb to more than 2-month highs
By Dominic Lau
TOKYO, Feb 27 The benchmark 10-year Japanese government bond yield fell to a near 10-year low on Wednesday as investors continued their flight-to-quality after an inconclusive Italian election raised concerns that efforts to resolve the euro zone debt crisis could suffer.
A pause in the yen's weakening after the Italian poll knocked Japanese equities lower, with the benchmark Nikkei losing 1.3 percent.
Comments by U.S. Federal Reserve Chairman Ben Bernanke on bond-buying also eased worries that the Fed might make an early withdrawal of support for the debt market, which prevented Treasury yields from rising despite better economic data.
"The market had expected him to comment on an exit strategy ... (but) Bernanke tried to correct such expectations," said Maki Shimizu, a senior strategist at Citigroup Global Markets Japan.
Shimizu said the stall in yen's weakening against the dollar and the euro would likely keep Japanese equities in check, supporting JGBs. "(Any rise in yield) is a major concern for domestic investors ahead of the March book-closing," she said.
The 10-year yield slipped 1 basis point to 0.670 percent, hitting its lowest since June 2003 and falling for a fifth straight session.
Ten-year JGB futures rose 15 ticks to 144.99 - a more than two-month high - with 28,981 contracts changing hands, down from 32,347 on Tuesday and last week's daily average of 31,486.
Superlong bonds outperformed, causing the yield curve to flatten. The spread between the 10- and 20-year bonds narrowed to 98.5 basis points, marking a six-week low.
The 30-year yield eased 2.5 basis points to 1.845 percent, touching a six-month low, and the 20-year yield dipped 2.5 basis points to 1.655 percent, a two-month trough.
"No one wants to sell JGB superlong sectors. Everyone knows that the superlong sectors are still traded at a cheaper level relative to the 10-year sector," said a fixed-income fund manager at a Japanese asset management firm in Tokyo.
"Trading volume is pretty light ... Sellers are pretty limited."
The five-year yield was unchanged at a record low of 0.115 percent.
The two-year yield was also flat, at 0.04 percent, before an auction on Thursday of 2.7 trillion yen ($29.5 billion) in that maturity.
The short end of the yield curve has been supported by expectations of bolder monetary easing by the Bank of Japan once Prime Minister Shinzo Abe nominates a new governor.