JGB yields rise as market awaits BOJ meeting next week

By Brigid Riley

TOKYO, June 7 (Reuters) - Japanese government bond (JGB) yields rose on Friday, as investor focus shifted to whether the Bank of Japan (BOJ) will announce a tapering of its bond purchases next week.

Yields have fallen from more than a decade peaks this week, tracking a decline in U.S. Treasury yields.

Firm demand at an auction for 30-year JGBs on Thursday added downward pressure on yields, but the market broke the trend on Friday, with yields rising across the curve.

The benchmark 10-year yield rose 2.5 basis points (bps) to 0.98%, while 10-year futures fell 0.28 yen to 143.87 yen.

The two-year yield, which is more sensitive to monetary policy expectations, also ticked up 2.5 bps to 0.355%.

The upward move largely appeared to be a rebound after a significant decline in the previous session, with investors still cautious ahead of the BOJ's meeting on June 13-14, said Yurie Suzuki, a market analyst at Mizuho Securities.

"It's not as if market expectations regarding BOJ policy such as those for additional rate hikes in the future have lessened, so I believe that's connected to the sell-off," she added.

Yields move inversely to bond prices, rising as bonds are sold and prices fall.

Many market players anticipate the central bank could begin a full-fledged tapering of bond purchases at its June meeting, following an unexpected cut to a segment of the BOJ's offer amounts on May 13 and a hawkish turn in policymakers' comments.

Expectations have also grown for another rate hike as soon as July.

The BOJ left its offer amounts unchanged at a bond-buying operation in the Asian morning, although analysts said that's had little effect on today's market moves.

The five-year yield climbed 3 bps to 0.57%.

The 20-year yield was 2.5 bps higher at 1.78%, while the 30-year yield edged up 1.5 bps to 2.1%. (Reporting by Brigid Riley; Editing by Varun H K)