By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 9 U.S. Treasury yields rose on
Friday, with long-dated maturities reaching more than two-month
highs, in line with Japanese government bonds, after reports
suggested the Bank of Japan is considering measures to cut
short- to medium-term yields, while lifting those of long-term
The U.S. Treasury market has been moving in tandem with JGBs
over the last six months, analysts said, since Japanese
investors of late have been the biggest buyers of U.S.
U.S. 30-year bond yields, which move inversely to prices,
rose to 10-week peaks, while 10-year note yields hit 11-week
highs. The rise in yields was across the board, with U.S. 7-year
notes touching the highest in more than two months and 5-year
notes rising to a one-week high.
Sources on Friday said the BOJ is studying options to
steepen the yield curve, as authorities desperately seek out
policy tools to revive an economy that has remained stagnant
despite years of massive stimulus.
As a result, the 20-year JGB yield rose 5 basis points to a
five-month high of 0.435 percent, while the
30-year JGB yield added 7 basis points to 0.515 percent
A plan by the BOJ to steepen the JGB curve could have
negative consequences for U.S. Treasuries, since any attempt to
push long-term yields higher would make JGBs attractive once
again to Japanese investors, said Gennadiy Goldberg, interest
rates strategist, at TD Securities in New York.
That could potentially reduce Japanese flows into
Treasuries, he added.
Japanese investors were big buyers of foreign bonds in July,
amassing about $47 billion, the second largest for data going
back to 2005. The majority of that flow was in U.S. Treasuries,
In mid-morning New York trading, benchmark 10-year Treasury
notes were down 15/32 in price to yield 1.669
percent, compared with 1.616 percent late on Thursday. Yields
rose as high as 1.671 percent, an 11-week high.
The 30-year Treasury bond fell more than a point
in price to yield 2.395 percent, compared with 2.322 percent on
Bond yields also rose after Boston Federal Reserve President
Eric Rosengren said on Friday the Fed increasingly faces risks
if it waits too much longer in raising interest rates, so a
gradual policy tightening is likely appropriate.
After Rosengren's speech, Fed funds futures indicated that
investors see a 30 percent chance of a rate increase at the
Federal Open Market Committee meeting this month, up from 18
percent late on Thursday.
Also, the addition of Fed Governor Lael Brainard as a
speaker on Monday at the Chicago Council of Global Affairs, on
the eve of the Fed blackout prior to the Sept 20-21 FOMC
meeting, has fueled speculation she may say something on
monetary policy, analysts said.
It would be a surprise though if Brainard, one of the dovish
FOMC members, spoke in favor of a rate hike this month.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve