TOKYO, Oct 3 (Reuters) - Japanese government bond yields tracked a rise in their U.S. peers and rose on Tuesday, with a 10-year bond auction drawing lukewarm demand as a surge in equities curbed investor interest towards safe-haven debt.
The benchmark 10-year JGB yield rose 1 basis point to 0.080 percent, highest since July 26. The 20-year yield edged up half a basis point to 0.595 percent.
The bid-to-cover ratio, a gauge of demand, at Tuesday's 2.3 trillion yen ($20.33 billion) 10-year JGB auction rose to 4.08 from 3.95 at the previous sale in September.
However, the lowest accepted auction price came in at 100.17 yen, below dealers' expectations of 100.22 yen, an indication that investor demand for the new JGBs remains soft.
Japanese stocks hit fresh two-year highs on Tuesday, tracking a Wall Street rally as upbeat manufacturing and construction spending data pointed to underlying strength in the U.S. economy.
The benchmark Treasury yield climbed to a three-month high on Monday in the wake of the robust economic indicators and Wall Street's surge.
$1 = 113.1600 yen Reporting by the Tokyo markets team; Editing by Sam Holmes