JGB 10-year yield hits six-year high as global tightening pressures BOJ

By Kevin Buckland

TOKYO, Jan 31 (Reuters) - Benchmark 10-year Japanese government bond yields climbed on Monday to their highest since the start of the Bank of Japan's negative interest rate policy six years ago, as investors pondered whether the central bank will be swayed by policy tightening in the United States and elsewhere.

The 10-year JGB yield JP10YTN=JBTC rose as high as 0.185% for the first time since Jan. 29, 2016, before closing 0.5 basis point higher at 0.170%. The BOJ's yield curve control policy pegs the benchmark yield in a 25 bp band either side of zero.

Benchmark 10-year JGB futures 2JGBv1 fell 0.05 point to 150.72, with a trading volume of 22,528 lots.

Yields have risen globally as central banks from Washington, D.C. to Wellington, New Zealand pursue more hawkish paths to policy normalisation amid stubbornly hot inflation, even as the BOJ has reiterated its commitment to ultra-easy monetary conditions.

"There's a part of the market that seems to think that the BOJ won't be able to ignore the change in global (monetary policy) conditions," said Chotaro Morita, head of Japan rates strategy at SMBC Nikko Securities.

The 20-year JGB yield JP20YTN=JBTC jumped to 0.570% for the first time since Feb. 26, before ending the day 1 basis point higher at 0.560%.

The 30-year JGB yield JP30YTN=JBTC rose 2 basis points to 0.775%, a level not seen since December 2018.

The two-year JGB yield JP2YTN=JBTC ended flat at minus 0.055% after earlier reaching minus 0.050% for a second straight day, which was also the highest since January 2016.

The five-year yield JP5YTN=JBTC finished flat at minus 0.020%. It reached a six-year high of minus 0.010% on Thursday.

"While BOJ Governor (Haruhiko) Kuroda continues to deny a possible policy change in the near future, the JGB market is becoming nervous," Tohru Sasaki, head of Japan Markets Research at JPMorgan, wrote in a note.

Ahead of an exit of stimulus, the BOJ is likely to shift its yield curve control target from the 10-year to the five-year JGB, he said, noting the rise in the five-year yield towards zero this month.

(Reporting by Kevin Buckland; Additional reporting by Tokyo markets team; Editing by Subhranshu Sahu)

((Kevin.Buckland@thomsonreuters.com;))

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