JGB yields track US peers higher, domestic auctions weigh on sentiment

TOKYO, Sept 2 (Reuters) - Japanese government bond yields rose on Monday, tracking U.S. Treasury yields higher at the end of last week, while auctions for domestic bonds this week weighed on sentiment.

The 10-year JGB yield rose 1.5 basis points (bps) to 0.905%. The two-year JGB yield rose 0.5 bp to 0.365% and the five-year yield rose 1.5 bps to 0.51%.

U.S. Treasury yields advanced on Friday after economic data raised expectations the Federal Reserve was likely to opt for a small rate cut at its September meeting.

"In addition to U.S. Treasury yields rising higher on Friday, we have auctions for 10-and-30-year bonds this week, that weighed on investor sentiment," said Takahiro Ohtsuka, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

The finance ministry will hold the 10-year bond auction on Tuesday and the 30-year bond auction on Thursday.

Still the current level of the yield on the 10-year bonds is not high enough if the Bank of Japan is to raise interest rates this year.

"The market is probably not pricing in a possible rate hike in September or October," said Ohtsuka.

The 30-year JGB yield rose 1.5 bps to 2.105%.

The 20-year JGB yield also rose 1.5 basis points to 1.725%.

The 40-year JGB yield rose 2.5 basis points to 2.385%. (Reporting by Junko Fujita; Editing by Mrigank Dhaniwala)