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

By Rocky Swift and Junko Fujita

TOKYO, Dec 22 (Reuters) - Japanese government bonds 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, most sensitive to central bank policy, rose 3 basis points to 1.12%, breaking through the previous all-time high set in 2007.

The benchmark 10-year yield JP10YTN=JBTC, which climbed above 2% on Friday for the first time in 26 years, jumped another 6 bps to 2.08%.

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 that authorities would take "appropriate" action against excessive exchange-rate moves.

The 20-year yield JP20YTN=JBTC touched 3.025%, while the 30-year yield JP30YTN=JBTC hit 3.445%, both all-time highs. The five-year yield JP5YTN=JBTC rose 5 bps to 1.535%, a level not seen since June 2008.

Data on Monday showed that foreign investors were net buyers of super-long-dated JGBs for an eleventh consecutive month, purchasing over 900 billion yen ($5.72 billion) of the securities in November, nearly double the amount from October.

Recent volatility in JGBs is a reflection of increased activity from overseas investors, said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.

"Foreigners' bets on a flattening of the curve between 10- and 30-year JGB yields became obvious from the November data," Inadome said.

($1 = 157.2600 yen)