JGB yields track Treasuries lower; BOJ hike bets limit decline

By Kevin Buckland

TOKYO, Jan 16 (Reuters) - Japanese government bond yields fell on Thursday amid pressure from a steep slide in U.S. bond yields overnight, as cooling core inflation reignited bets for a Federal Reserve interest rate cut by July.

However, rising bets for the Bank of Japan to raise rates at its meeting next week bolstered the yen and mitigated the decline in domestic yields.

The 10-year JGB yield JP10YTN=JBTC fell 1 basis point to 1.24% as of 0300 GMT, retreating from Wednesday's peak of 1.255%, a level previously not seen since April 2011.

The benchmark yield had earlier fallen as low as 1.225% but pared the decline as the yen strengthened to a nearly one-month high of 155.21 per dollar JPY=EBS.

The 10-year U.S. Treasury yield US10YT=RR stood at 4.6612% on Thursday, after plunging as much as 15 bps to a one-week low of 4.6370% in the prior session.

Comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week opened the door to an imminent tightening of policy. Reuters and other media reported that a rate hike is likely on Jan. 24, barring a resurgence in market volatility after Donald Trump's inauguration as U.S. President.

"Although there is still elevated uncertainty around the Trump administration's management of policy and the market's reaction thereto, it appears that at least the BOJ's stance on rate hikes has completely changed since December," Barclays analysts wrote in a report, as they brought forward their call for the next BOJ hike to this month from March.

The five-year JGB yield JP5YTN=JBTC fell 1 bp to 0.88%.

The 20-year yield JP20YTN=JBTC fell 1 bp to 2.005%, while the 30-year yield JP30YTN=JBTC was flat at 2.355%.

The two-year JGB JP2YTN=JBTC had not yet traded on the day.

Benchmark 10-year JGB futures 2JGBv1 rose 0.19 yen to 140.78. Yields move inversely to bond prices.

(Reporting by Kevin Buckland; Editing by Rashmi Aich)

((Kevin.Buckland@thomsonreuters.com;))