Benchmark JGB yields rise to one-month high on inflation fears

By Rocky Swift

TOKYO, March 16 (Reuters) - Benchmark Japanese government bond yields rose to a one-month high on Monday as the escalating Middle East crisis fuelled expectations of higher inflation and potential policy tightening by the Bank of Japan.

The 10-year JGB yield JP10YTN=JBTC rose 3 basis points (bps) to 2.270%, the highest since February 9. The 20-year JGB yield JP20YTN=JBTC climbed 4 bps to 3.145%.

Yields move inversely to bond prices.

Global bond yields are on the rise as the war in Iran, now in its third week, pushes oil prices sharply higher and increases pressure on central banks to combat inflation fears.

The BOJ is widely expected to keep its key interest rate steady at its policy meeting on Thursday. Still, the combination of surging imported energy costs and a weakening yen is strengthening the case for a faster pace of rate hikes.

"Against the backdrop of growing momentum for further BOJ rate hikes, short- to medium-term yields are likely to rise, driven by the risk-neutral rate," Barclays analysts led by Shinichiro Kadota said in a note.

The 30-year yield JP30YTN=JBTC added 4.5 bps to 3.550%. The yield on the 40-year JGB JP40YTN=JBTC, Japan's longest tenor, rose 5 bps to 3.785%.

The two-year yield JP2YTN=JBTC, the one most sensitive to BOJ policy rates, decreased 1 bps to 1.275%. The five-year yield JP5YTN=JBTC rose 0.5 bps to 1.685%.