JGB yields track US peers to April highs as trade tensions ease

By Kevin Buckland

TOKYO, May 13 (Reuters) - Japanese government bond yields rose on Tuesday to their highest since U.S. President Donald Trump's April 2 "Liberation Day," when he announced a flurry of tariffs on U.S. trading partners.

U.S. Treasury yields rose on Monday after weekend talks between U.S. and Chinese negotiators yielded a 90-day pause in their tit-for-tat trade spat and sharply lowered the tariffs the world's top two economies had imposed on each other.

Bank of Japan deputy governor Shinichi Uchida told parliament on Tuesday that the central bank expects wages and prices to keep rising, even as the uncertainty over U.S. tariff policy weighs on the economy, keeping policymakers on course to continue raising interest rates.

The 10-year JGB yield JP10YTN=JBTC rose as much as 8 basis points (bps) to 1.465%, while the five-year yield JP5YTN=JBTC advanced 9 bps to 1%, both highs since April 2.

Benchmark 10-year JGB futures 2JGBv1 fell as much as 0.96 yen to 139.08 yen, the lowest since April 2. Bond yields move inversely to prices.

The two-year yield JP2YTN=JBTC rose 6.5 bps to 0.72%, the highest since April 3.

However, Mizuho Securities analysts said they doubt JGB yields will stay at the current highs.

"The outcome of these discussions remains uncertain," said Noriatsu Tanji, Mizuho's chief bond strategist, referring to the U.S.-China trade truce.

"The recent rebound in the market, including in risk asset prices, may be seen as somewhat excessive, occurring in low liquidity conditions" that exacerbate price swings, he said.

Superlong JGB yields initially rose, before later reversing direction.

The 30-year yield JP30YTN=JBTC added 1 bp to reach a new record high of 2.96%, but then sank 5 bps to 2.9%.

An auction of 30-year bonds saw weak demand, but such a result had been widely expected, producing a limited reaction in the market, analysts said.

The 20-year JGB yield JP20YTN=JBTC rose as much as 1.5 bps early in the session, but then declined in sympathy with the 30-year bond, and was last down 2.5 bps at 2.36%.