Short-term JGB yields rise to record high after last week's BOJ rate hike

By Rocky Swift

TOKYO, Dec 22 (Reuters) - Japanese government bonds (JGBs) fell further on Monday, sending short-term yields to a record high, following the central bank's interest rate hike last week.

The two-year JGB yield JP2YTN=JBTC, the one most sensitive to central bank policy, rose 1.5 basis points (bps) to 1.105%, breaking through the previous all-time high set from 2007.

The 10-year yield JP10YTN=JBTC, which climbed above 2% on Friday for the first time in 26 years, climbed another 5 bps to 2.07%.

The Bank of Japan on Friday raised its key interest rate to a three-decade high and signalled its readiness to continue raising rates.

Even so, the yen weakened sharply after the decision, as BOJ Governor Kazuo Ueda was not as hawkish about policy tightening as markets had anticipated.

"The 10-year yield easily breaking above the key 2% threshold can be seen as evidence of poor sentiment in the JGB market," Noriatsu Tanji, chief bond strategist at Mizuho Securities, said in a note.

"Unstable movements are likely to persist for the time being."

Japan's top currency diplomat, Atsushi Mimura, said on Monday authorities would take "appropriate" action against excessive exchange-rate moves, warning of the chance of intervention.

The 20-year JGB yield JP20YTN=JBTC rose 3 bps to 3%. The five-year yield JP5YTN=JBTC rose 3.5 bps to 1.52%, the highest since June 2008.