JGBs advance on stronger Treasuries, sliding Nikkei

* Investors pick up bonds as Tokyo stocks fall

* Demand from bond redemptions underpins JGBs

* Nikkei slides nearly 3 pct on weak Wall St, stronger yen

* JGB futures rise to highest since early May

TOKYO, June 23 - Japanese government bonds advanced on Tuesday, taking the benchmark yield to its lowest in a month, as gains in Treasuries the previous day and a slide by Tokyo's Nikkei stock average enhanced the appeal of safe-haven debt.

Domestic investors, flush with cash from 10 trillion yen ($104 billion) of JGBs maturing in June, picked up bonds to push yields down across the curve, with the yield on the five-year JGB falling to its lowest in three months.

"Many investors held back from parking their surplus funds in JGBs ahead of the issuance increase starting with this week's two-year auction," said Takafumi Yamawaki, a senior fixed-income strategist at BNP Paribas.

"But with U.S. and Japanese stocks losing momentum, they appear to have judged this an opportunity to buy bonds, with their cautious stance towards a possible economic recovery seemingly vindicated for now."

The Nikkei slid 2.8 percent on Tuesday, hurt by a weaker Wall Street and a stronger yen.

The Ministry of Finance announced in April that it would sell an additional 16.9 trillion yen of JGBs for the financial year ending in March 2010 to finance the government's fiscal stimulus packages.

The increase begins with a two-year tender on Thursday, the amount boosted to 2.4 trillion yen from 2 trillion yen.

The two-year auction is expected to be relatively smooth as the maturity benefits from the Bank of Japan's easy monetary policy.

Also in focus is the reaction of Treasuries investors to the two-day Federal Reserve meeting starting later in the day and to this week's slew of auctions through which the U.S. Treasury will issue a record $104 billion of debt.

Economists expect the Fed to hold the target range for its benchmark federal funds rate steady at zero to 0.25 percent, and probably to make no shifts in its asset purchase programmes.

"The impact on the JGB market from the outcome of the Fed meeting will depend on how Treasuries and U.S. stocks react to it," said Makoto Yamashita, a strategist at Deutsche Securities.

"If the Fed does not mention its Treasury buying programmes, uncertainty could arise as to the central bank's policy," he said.

September 10-year futures gained 0.44 point to 137.44, a tad below the day's high of 137.45, the highest since May 7 and their eighth consecutive day of gains.

The yield curve flattened as some participants bought back longer-dated debt from losses made the previous day, while shorter-maturities have been supported by a view that the Bank of Japan will keep its low interest rate policy.

The two-year yield slipped 1 basis point to 0.340 percent. A decline below 0.335 percent would mark its lowest point since February 2006.

The five-year yield fell 2 basis points to 0.755 percent after touching 0.750 precent, the lowest since March 25.

The 10-year yield fell 5 basis points to 1.405 percent, its lowest since mid-May.

The benchmark 10-year JGB yield struck an eight-month peak of 1.560 percent earlier in the month, pressured by a jump in Treasury yields and a stock market rally that pushed Tokyo's Nikkei average to an eight-month closing high above 10,000.

The 20-year yield was down 4 basis points at 2.090 percent.

U.S. Treasuries were bolstered on Monday by Wall Street's weakness and a warning by the World Bank that prospects for the global economy remained "unusually uncertain" despite recent signs of improvement in parts of the world. The bank cut its 2009 growth forecasts for most economies.