TOKYO, Feb 7 (Reuters) - Japan's government bond yields hit fresh multi-year highs on Friday on bets that the Bank of Japan (BOJ) may raise interest rates earlier than the market had expected.
The 10-year JGB yield JP10YTN=JBTC rose 4 basis points (bps) to 1.3%, its highest since April 2011. The two-year JGB yield JP2YTN=JBTC rose 3.5 bps to 0.795%, its highest since October 2008.
"The yields rose on bets for the BOJ's rate hike, which were underpinned by comments from BOJ's board member," said Miki Den, senior Japan rate strategist at SMBC Nikko Securities.
BOJ's hawkish board member Naoki Tamura said on Thursday that the central bank must raise rates to at least 1% by the second half of the fiscal year beginning in April.
That is a faster-than-expected rate hike pace. After the BOJ raised interest rates last month to 0.5%, some market players see the central bank will raise the rate one more time to 0.75% by December.
Swap rate shows about a 80% chance of the BOJ raising rates by 25 bps to 0.75% at its July meeting. 0#JPYIRPR
Den said a weak outcome of the BOJ's bond-buying operation earlier in the day also dented sentiment, as stronger demand to sell bonds to the BOJ signalled fears for the further rate hike.
The BOJ offered to buy bonds with maturities ranging from one to 10 years in its regular operation.
The five-year yield JP5YTN=JBTC rose 5 bps to 0.985%, its highest level since October 2008.
The 20-year JGB yield JP20YTN=JBTC rose 2.5 bps to 1.97% and the 30-year JGB yield JP30YTN=JBTC rose 2.5 bps to 2.285%.
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