TOKYO, Feb 2 (Reuters) - Japanese government bond prices dipped on Thursday, with the 20-year yield rising to its highest in a year, as slack demand for an auction of 10-year debt weighed on market sentiment.
The benchmark 10-year JGB yield rose half a basis point to 0.095 percent, its highest since mid-December.
The 20-year yield also rose half a basis point, to 0.670 percent, its highest since February 2016.
The auction for the 2.4 trillion yen ($21.30 billion) 10-year bonds on Thursday failed to attract strong investor demand amid uncertainty over the Bank of Japan's monetary policy.
In an indication of subdued demand, the yield of 0.092 percent for the auction's lowest accepted price was the highest since the February 2016 auction.
While the BOJ on Tuesday maintained a pledge to guide short-term interest rates at minus 0.1 percent and the 10-year government bond yield to around zero percent after its policy meeting, the financial markets have begun to speculate about when the central bank might allow long-term rates to drift higher.
The yield curve has steepened amid such speculation, and on Thursday the 10-year/20-year JGB yield spread was at its widest since March 2016. ($1 = 112.7000 yen) (Reporting by the Tokyo markets team; Editing by Shri Navaratnam)