JGB yields rise to 10-week peak on hawkish BOJ bets, rising US yields

By Kevin Buckland

TOKYO, July 10 (Reuters) - Japan's benchmark 10-year government bond yield rose to a 10-week high on Monday, amid increasing speculation for a hawkish tweak to Bank of Japan (BOJ) policy at a meeting this month.

Japanese yields were also pushed higher by a rise in U.S. Treasury yields, after a run of solid employment data raised the odds of more Federal Reserve tightening.

The 10-year JGB yield added 2.5 basis points (bps) to 0.46%, the highest level since April 28. The BOJ sets a 0.5% policy ceiling under its yield curve controls (YCC).

Benchmark 10-year JGB futures fell 0.4 yen to 147.72, and at one point pushed as low as 147.63, a 10-week trough.

The five-year yield rose 2 bps to 0.115%.

Japan's pay grew at the fastest pace in nearly three decades, data on Friday showed, adding pressure on the BOJ to act at its July 27-28 meeting, potentially widening the range for the 10-year yield.

BOJ Governor Kazuo Ueda, who has been steadfastly dovish in his messages to the market, said at the European Central Bank's forum in Sintra, Portugal last month that Japan's central bank would see good reason to shift monetary policy if it became "reasonably sure" that inflation would accelerate into 2024.

"It's kind of unclear what the BOJ is waiting for before they decide to tweak YCC," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

"It seems the most important factor is the BOJ's confidence in the future path for prices, but it's vague," she added. "We can't quantify their confidence level. There's no scale."

Muguruma expects the BOJ to wait until October before raising the 10-year yield ceiling.

Meanwhile, 10-year Treasury yields rose 4 bps to as high as 4.084% in Tokyo, approaching Friday's eight-month peak at 4.094%.

Superlong JGB yields also pushed to 10-week highs. The 20-year yield rose 5 bps to 1.075%, and the 30-year yield rose 4.5 bps to 1.32%.

The two-year JGB had yet to trade as of 0210 GMT. (Editing by Rashmi Aich)