TOKYO, Dec 20 (Reuters) - Japanese government bond yields edged up on Wednesday, tracking U.S. Treasury yields on expectations of the biggest overhaul of the U.S. tax code in more than 30 years.
The 10-year JGB yield rose 1.5 basis point to 0.050 percent while the price of the benchmark 10-year JGB futures dropped 0.20 point, their biggest fall since their 0.32 point decline on Sept 28.
"Even the quiet JGB market had to react to the steepening in the U.S. market," said Naoya Oshikubo, yen rates strategist at Barclays.
The 10-year U.S. Treasury yield rose to a seven-week high as investors braced for the passage of the tax bills, which will cut tax on corporates and the wealthy and is also expected to add at least $1 trillion to the U.S. national debt.
The 20-year JGB yield rose 1.0 basis point to 0.570 percent while the 30-year yield was up 1.5 basis points at 0.810 percent, bouncing back from a one-month low of 0.800 percent touched on Tuesday.
Thirty-year bonds have been bought on expectations that the Ministry of Finance will reduce the issuance of that maturity.
Sources told Reuters on Tuesday that the MOF is set to reduce sales of 2-, 5-, 10-, 30-year and 40-year JGBs in fiscal 2018.
"I expect the JGB yield curve to start flattening again, given that we still have two more buying by the Bank of Japan by the end of month," said Barclays' Oshikubo.
Most market players expect the Bank of Japan to make no policy change at its two-day policy meeting that started on Wednesday. (Reporting by Tokyo Markets Team; Editing by Sunil Nair)