TOKYO, Nov 11 (Reuters) - Japanese government bonds gained on Wednesday and the yield curve flattened as a well-received U.S. 10-year notes auction was welcomed by a market that had fiscal concerns partially offset by the government's show of concern over rising long-term rates.

* The two-year/10-year yield spread tightened to 119 basis points from a 3-½ year high of 121 basis points on Tuesday.

* JGB gains were curbed by caution ahead of a 2.4 trillion yen ($26.7 billion) five-year debt auction on Wednesday. The auction is seen as a key test of investor demand as fiscal concerns have rattled the bond market over the past month.

* The benchmark 10-year JGB yield hit a five-month high on Tuesday as investors have been bracing for issuance increases by the government to offset low demand for retail bonds, fund an expected tax revenue shortfall and help finance the country's spending plans for the next fiscal year.

* But supply worries eased slightly later on Tuesday after the government showed concern over the state of the bond market. Finance Minister Hirohisa Fujii said on Tuesday he was concerned about rising long-term bond yields and that the government must ensure its spending plans did not rattle bond investors' confidence. [ID:nT218318]

* Decent demand for 300 billion yen of 40-year JGBs sold on Tuesday also helped soothe market sentiment after a string of poorly received auctions over the past month.

* The recent sharp rise in the cost of insuring against default in government debt came to a stop on Tuesday. Five-year credit default swaps JPGV5YJPAC=MP on Japan's sovereign debt were at about 75 basis points on Tuesday, unchanged from Monday. That compared with around 66 bps on Friday and 45 bps three weeks ago. The spread was near its highest level since April, though still below a record of 130 touched in February.

* December 10-year JGB futures 2JGBv1 rose 0.17 point to 137.72, pulling away from a three-month low of 137.29 struck on Monday.

* The two-year yield JP2YTN=JBTC dipped 0.5 basis point to 0.255 percent and the five-year yield JP5YTN=JBTC fell 1 basis point to 0.695 percent.