JGB yields mixed before US inflation data as central bank meetings loom

By Kevin Buckland

TOKYO, Sept 11 (Reuters) - Japanese government bond (JGB) yields were mixed on Thursday as traders adjusted positions ahead of key U.S. consumer price data later in the day that is likely to inform the path of Federal Reserve policy.

The Fed decides interest rates on Wednesday of next week, with the Bank of Japan announcing its own policy decision two days later.

The U.S. central bank is universally expected to cut rates by at least a quarter point then, with a focus on whether there is scope for a combined 75 basis points (bps) of cuts by year-end.

Meanwhile, the BOJ is widely seen as standing pat amid political uncertainty domestically.

The longest-dated JGB yields edged lower in the latest session, extending their retreat from a record high to a third day.

Investors are pondering the outlook for the nation's finances after the fiscally hawkish Shigeru Ishiba announced he would step down as prime minister at the weekend.

The leading candidates to replace him have almost opposite fiscal views, with Shinjiro Koizumi seen as the continuity candidate, while Sanae Takaichi backs increased spending.

The 30-year JGB yield JP30YTN=JBTC declined 1 bp to 3.22%, down from an unprecedented 3.275% on Monday.

The 20-year yield JP20YTN=JBTC, however, rose 1 bp to 2.645%, and 10-year yields JP10YTN=JBTC added 1 bp to 1.575%, keeping within the narrow ranges of recent days.

Five- JP5YTN=JBTC and two-year yields JP2YTN=JBTC each edged up 0.5 bp to 1.115% and 0.855%, respectively, after rising off 3-1/2-week lows from Tuesday.

Although market-implied odds of a BOJ rate hike this year have declined in recent weeks to just a coin toss, investors and analysts still believe the pieces are falling into place for an eventual resumption of policy tightening.

Data on Thursday showed wholesale inflation accelerated in August, and top-ranking central bank policymakers have signaled the need to continue to tighten policy, albeit cautiously.

More than half of economists polled by Reuters predict a cut in the fourth quarter of this year, with meetings in October and December.

"As of now, it is quite frankly difficult to 'pinpoint' the timing of the BOJ's next rate hike," Mizuho Securities economist Yusuke Matsuo wrote in a note.

"The BOJ itself is unlikely to have any particular meeting in mind at this juncture."