JGB yields tick lower, tracking US peers ahead of BOJ meeting

By Kevin Buckland

TOKYO, April 28 (Reuters) - Japanese government bond yields edged lower on Monday, under pressure from a decline in U.S. Treasury yields, with traders seeing little chance for any near-term policy tightening by the Bank of Japan.

The 10-year JGB yield fell 1.5 basis points (bps) to 1.315% as of 0427 GMT, tracking a drop of about 3 bps for equivalent Treasuries to hit an almost three-week low of 4.233% in Asian hours.

Benchmark 10-year JGB futures rose 0.21 yen to 140.64 yen. Bond yields move inversely to prices.

Japanese Finance Minister Katsunobu Kato and Japan's top currency diplomat, Atsushi Mimura, both on Monday denied a weekend report in the local media, saying U.S. Treasury Secretary Scott Bessent expressed a desire for a stronger yen versus the dollar.

Any request from Washington over the exchange rate could increase pressure on the BOJ to tighten policy more quickly. The central bank is widely expected to leave rates unchanged at its two-day meeting ending Thursday.

Japanese markets are closed Tuesday for a public holiday.

"Barring a joint effort by the U.S. and Japan to guide the yen officially and substantially higher against the dollar, the Bank of Japan is unlikely to face unreasonable pressure to raise interest rates to influence the exchange rate," Mizuho chief bond strategist Noriatsu Tanji wrote in a note.

Mizuho projects the BOJ will likely raise rates by a quarter point to 0.75% by July but that will be the final increase for the current tightening cycle.

The five-year JGB yield fell 0.5 bp to 0.89%, while the two-year yield was flat at 0.685%.

The 20-year yield declined 1 bp to 2.21%.

The 30-year yield, by contrast, rose 2.5 bps to 2.72%. (Reporting by Kevin Buckland; Editing by Rashmi Aich)