Japan bonds fall as stock rally slashes demand for safe-haven debt

By Kevin Buckland

TOKYO, Aug 8 (Reuters) - Japanese government bonds (JGBs) fell on Friday, pushing yields higher, as a rally in stock markets spurred investors to sell safe-haven debt, with hawkish signals from the Bank of Japan also weighing on bond prices.

The 10-year JGB yield JP10YTN=JBTC rose 0.5 basis point (bp) to 1.49% as of 0404 GMT, while benchmark 10-year JGB futures 2JGBv1 slipped 0.06 yen to 138.59 yen.

Yields move inversely to prices.

The market was also under selling pressure after U.S. Treasury bonds declined overnight, in the wake of a soft auction of 30-year debt. US/

Japanese 30-year bond yield JP30YTN=JBTC added 1 bp to 3.07%. However, 20-year JGB yield JP20YTN=JBTC reversed an early rise to head 0.5 bp lower to 2.51%.

Japan's Nikkei share average .N225 soared 2.3% and the broader Topix index .TOPX climbed 1.5% to a record peak on the back of strong earnings, and after the nation's top trade negotiator said U.S. officials promised to amend a presidential executive order to remove overlapping tariffs on Japanese goods, including autos. .T

Meanwhile, a summary of opinions from the Bank of Japan's (BOJ) meeting last month showed policymakers debated the likelihood of resuming interest rate hikes, with one signalling the chance of an increase this year.

Shorter-dated bonds tend to be most sensitive to monetary policy expectations. The two-year JGB yield JP2YTN=JBTC added 0.5 bp to 0.77% and the five-year yield JP5YTN=JBTC advanced 2 bps to 1.045%.

"We ourselves believe that the arguments for hiking are ultimately stronger than those for waiting, and expect the BOJ to resume its policy rate normalization sooner rather than later," Mizuho Securities analysts wrote in a client note, forecasting a quarter-point hike either next month or in October.

"Holding off for too long may only serve to heighten the risk of the central bank finding itself 'behind the curve'."