Benchmark JGB yields hit 18-year high as BOJ rate-hike bets gather steam

By Rocky Swift

TOKYO, Dec 5 (Reuters) - Benchmark Japanese government bonds (JGBs) slid further on Friday, pushing yields to an 18-year high, as expectations firmed for rate hikes by the Bank of Japan.

The 10-year JGB yield edged up 0.5 basis point to 1.94%, its highest level since July 2007. It is on track for a 13.5 bp gain this week, marking the steepest five-day climb since March. Yields move inversely to bond prices.

Japan's long-dated bonds have fallen sharply following the announcement of a massive spending plan by Prime Minister Sanae Takaichi to be funded largely by new borrowing. Shorter-term notes, those most sensitive to central bank policy, are also down on signals the BOJ is ready to raise rates.

"We're seeing JGB yields push higher amid expectations of the BOJ tightening," Skye Masters, head of markets research at National Australia Bank, said in a podcast.

But a strong auction of 30-year JGBs on Thursday is evidence that the run-up in yields is attracting buyers back into the market, Masters added.

"Investors aren't necessarily shying away from the move higher in yield. They're actually using that as a buying opportunity," she said.

Short-term JGB yields are hovering near 17-year peaks, while super-long-term yields have repeatedly punched through record highs.

The BOJ is likely to raise interest rates at its meeting this month with the government expected to tolerate such a decision, Reuters reported on Thursday.

Finance Minister Satsuki Katayama reiterated on Friday that officials were watching market movements closely and would pursue appropriate debt management policies.

(Editing by Sherry Jacob-Phillips)