Benchmark JGB yields at two-week high on US Treasury slide, BOJ rate-hike pressure

By Rocky Swift

TOKYO, Aug 15 (Reuters) - Japanese government bonds slid on Friday, pushing benchmark yields to a two-week high, after overnight losses in U.S. Treasuries and as traders evaluated pressure on the central bank to raise interest rates.

Demand for safer assets also diminished as domestic shares rallied and data showed Japan's economy grew much faster than expected in the second quarter.

The yield on the 10-year JGB JP10YTN=JBTC rose 1 basis point (bp) to 1.56% after earlier touching 1.565%, the highest since July 31. Futures for the bonds 2JGBv1 fell 0.06 yen to 137.91.

JGBs fell on Thursday following comments by U.S. Treasury Secretary Scott Bessent that the Bank of Japan will likely be raising interest rates as it is behind the curve in dealing with the risk of inflation. Japan's economy minister Ryosei Akazawa said on Friday Bessent's comments were not a call for action by the BOJ.

"We think the Bank will pursue discussions with an eye to raising rates, possibly by the end of the year," Yusuke Matsuo, senior market economist for Mizuho Securities, wrote in a note. "If the BOJ maintains this stance, we do not think the Trump administration will express an active intention to intervene against the Bank or the Japanese government."

U.S. Treasury yields rose on Thursday after data showed that producer prices increased more than expected in July. Japan has key inflation data due next week that will feed into rate expectations for the BOJ.

Data on Friday showed Japan's economy expanded at an annualised rate of 1% in the April-June quarter, beating forecasts. Analysts expect the full impact of U.S. tariffs on growth to emerge later.

The 20-year yield JP20YTN=JBTC rose 1 bp to 2.56%, while the 30-year JGB yield JP30YTN=JBTC rose 1.5 bps to 3.1%.