TOKYO, May 8 (Reuters) - Super-long Japanese government bond yields rose on Friday following a fall in U.S. Treasury yields, while investors braced for what is expected to be grim U.S. payrolls data.
U.S. Treasury yields fell from three-week highs on overnight, with short-term rates setting record lows, while federal funds futures priced in negative U.S. interest rates for the first time.
Japanese government bond futures rebounded from the previous day, with benchmark 10-year JGB futures rising 0.1 point to 152.37 with a trading volume of 9,204 lots.
While analysts say the possibility of short-end Treasury yields going negative is unlikely, they said such a move would pressure JGBs.
“If the short-end yields become negative, there won’t be any gaps in interest rate between the United States and Japan, and USD/JPY rates would decline,” said Tadashi Matsukawa, head of fixed income investment at PineBridge Investments.
“The Bank of Japan would have no choice but to take action and embark on deeper negative rates.”
Katsutoshi Inadome, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said JGB yields could also rise in such a scenario if foreign buyers began to shy away.
“For those who hold dollars, the attractiveness to buy Japanese government bonds would be gone.”
The 10-year JGB yield rose 0.5 basis point (bp) to minus 0.010%.
The 20-year yield rose 0.5 bp to 0.335% while the 30-year yield rose 1 bp to 0.460%.
The two-year yield fell 2 bp to minus 0.175%, and the five-year fell 1 bp to minus 0.135%.
An employment report by the U.S. Labor Department is scheduled to be released later in the day. According to a Reuters survey of economists, nonfarm payrolls are forecast to have plunged by a historic 22 million in April, and the unemployment rate is seen jumping to 16%. (Reporting by Eimi Yamamitsu; Editing by Kim Coghill)