TREASURIES-US yields hit multi-month highs on Trump's tariff threats, Japanese spillover

SINGAPORE/LONDON, Jan 20 (Reuters) - U.S. long dated Treasuries sold off sharply on Tuesday and the yield curve steepened as investors processed U.S. President Donald Trump's threats to rekindle a trade war with Europe, as well as turmoil in the Japanese government bond market.

The super long U.S. 30-year yield rose 9 basis points to 4.93%, its highest since September, and was set for its biggest daily rise since July. US30YT=RR

Benchmark 10-year yields rose 6 bps to 4.29%, also their highest since September, while 2-year rate-sensitive yields actually dropped 1 bp to 3.58%. US10YT=RR, US2YT=RR

U.S. markets were closed on Monday due to a holiday so Tuesday was the first chance to react to weekend developments, when Trump threatened to impose an additional 10% import tariff from February 1 on goods from several European countries, until the U.S. is allowed to buy Greenland.

Major European Union states have since decried the tariff threats as blackmail and the bloc is looking at retaliating with its own measures.

The latest escalation of trade tensions has sparked broad selling of the dollar =USD, Treasuries and Wall Street futures, in a move reminiscent of last year's crisis of confidence in U.S. assets following Trump's "Liberation Day" announcement.

But analysts said that was not the only thing in the mix, as Japanese government bonds on Tuesday also saw significant selling, with spillovers into U.S. and European markets, after Prime Minister Sanae Takaichi's calling of a snap election shook confidence in the country's fiscal health. JP/

Kenneth Broux head of corporate research FX and rates at Societe Generale said it was "a perfect storm" of factors driving the moves in Treasuries.

He pointed to the "carnage" in the Japanese bond market, as well as the tariff threats, and simple momentum - yields had already been rising and the 10-year yield closed above 4.20% on Friday, which he said was a "technically important" level.

The steepening of the yield curve was also notable.

Yield curves are said to 'steepen' when longer dated yields rise relative to shorter dated ones, and the steepening in both the 2-year-10 year and 10 year-30 year parts of the yield curve was the most since October. US2US10=RR, US10US30=RR