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JGBs sag on lukewarm 10-year sale, weaker Treasuries

TOKYO, March 3 (Reuters) - Japanese government bond prices sagged on Tuesday, weighed down by lukewarm demand at a 10-year debt sale and overnight retreat by U.S. Treasuries.

The benchmark 10-year JGB yield rose 4 basis points to 0.380 percent. March 10-year futures fell 0.33 point to 147.54.

Market sentiment was dampened when the lowest accepted price of 99.70 at Tuesday's 2.4 trillion yen ($20 billion) 10-year JGB auction was much lower than expected, reflecting subdued investor demand for the new debt.

The Bank of Japan's extensive debt purchases as part of its monetary easing drove the 10-year yield to a record low of 0.195 percent in January but has also sucked up liquidity and made the market volatile, sending the benchmark to 0.450 percent in February.

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The bond market has often seen bouts of volatility on auction days this year as investor demand has proved inconsistent amid wide price swings.

"Since mid-February, both ends of the yield curve has drawn investor demand from life insurers in the 20-years and banks in the five-years, but such demand is yet to emerge in the 10-year zone," said Akito Fukunaga, chief rates strategist at Barclays Securities in Tokyo.

"This suggests the 10-years are still relatively expensive on the yield curve," he said. ($1 = 119.7000 yen) (Reporting by Tokyo markets team; Editing by Kim Coghill)