JGB yields hit fresh multi-year highs as rising wages drive BOJ's rate hike bets

TOKYO, Feb 5 (Reuters) - Japanese government bond (JGB) yields hit new multi-year highs on Wednesday after government data showed a rise in wages, bolstering chances of further interest rate hikes.

The 10-year JGB yield JP10YTN=JBTC rose to 1.295%, its highest since April 2011, and was last at 1.29%, up 1.5 basis points (bps) from the previous session.

The two-year JGB yield JP2YTN=JBTC, sensitive to the Bank of Japan's monetary policy, rose 2 bps to 0.76%, its highest since October 2008.

"The market sees declines of JGB yields are limited as they see the BOJ will keep raising interest rates, and that hurt appetite for JGBs," said Takafumi Yamawaki, head of Japan rates research at J.P. Morgan Securities.

Japan's inflation-adjusted real wages rose 0.6% year-on-year in December due to a wintertime bonus bump, marking a second consecutive monthly gain, with government officials expressing optimism that the momentum is growing.

Wage hikes are considered a key factor for the BOJ to raise rates. However, the market is divided about how far the policy rate will rise, making it hard for investors to buy JGBs.

The five-year yield JP5YTN=JBTC rose 2.5 bps to 0.95%, its highest since November 2008, before easing to 0.94%.

The 20-year JGB yield JP20YTN=JBTC rose 1 bp to 1.995%.

The 30-year JGB yield JP30YTN=JBTC rose 0.5 bps to 2.33%.

The 40-year JGB yield JP40YTN=JBTC fell 0.5 bps to 2.675%.

Separately, Kazuhiro Masaki, director-general of the BOJ's monetary affairs department, told parliament that the central bank will continue to raise rates if underlying inflation accelerates toward its 2% target as projected.