Japanese government bonds fall, tracking Treasuries on hawkish Fed signals

By Rocky Swift

TOKYO, June 18 (Reuters) - Japanese government bonds (JGB) fell on Thursday after hawkish signals from the U.S. Federal Reserve sent Treasuries lower and raised prospects of an earlier rate hike by the Bank of Japan.

Here are a few details:

* The 10-year JGB yield rose 2 basis points (bps) to 2.620%, poised for its highest close since June 16, after earlier touching 2.63%. The five-year yield edged up 0.5 bp to 1.865%. Yields move inversely to bond prices.

* Short-term Treasury yields rose to the highest in 16 months following the Fed's decision to hold steady on rates while the debut of new central bank Chair Kevin Warsh signalled a shift towards tighter policy.

* "Renewed realisation that U.S. monetary policy is shifting towards a rate hike before the end of the year is likely to exert selling pressure (on JGBs)," Keisuke Tsuruta, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said in a note.

* "Movements in overseas markets served to heighten awareness of the possibility of the Bank of Japan bringing forward its rate hike," Tsuruta said.

* Investors also weighed hawkish signals from the BOJ following its June 16 rate hike to 1%, the highest in 31 years. Deputy Governor Shinichi Uchida warned that the BOJ risked falling behind the curve on inflation, reinforcing expectations for further tightening.

* The two-year yield, the one most sensitive to BOJ policy rates, was flat at 1.385%. (Reporting by Rocky Swift; Editing by Subhranshu Sahu)