JGB yields rise as global politics add to pressure from yen

Japanese government bond yields rose on Monday as a weak yen stoked expectations for tighter Bank of Japan policy, while concerns over elections in France and the U.S. pushed yields higher globally.

The 10-year JGB yield rose 2.5 basis points to 1.065% as of 0438 GMT, ticking back towards an almost 13-year peak of 1.1% from late May.

Benchmark 10-year JGB futures fell 0.25 yen to 142.61, a nearly 11-year trough.

The 10-year yield rose more than other tenors, with an auction of the notes due on Tuesday. Demand is in question due to uncertainties over the BOJ's plans for quantitative tightening, which won't be announced until the July 30-31 policy meeting.

Meanwhile, expectations for a rate hike at the same gathering have been heightened by the yen's slump to a 37 1/2-year low to the dollar on Friday.

In the current environment, "it's easy for the yen bond market to test the topside for yields", said Noriatsu Tanji, chief bond strategist at Mizuho Securities. "There is a good chance that the 10-year yield will rise above 1.1% in the short term."

U.S. 10-year Treasury yields climbed to a fresh 2-1/2-week top in Tokyo hours, as concerns built over the fiscal consequences of a potential second Donald Trump presidency, following President Joe Biden's shaky debate performance last week.

French bond yields have also been rising on worries that an election win for the far-right National Rally could add to the country's debt pile, although results from first-round voting on the weekend showed the party winning less votes than some polls had predicted.

Japan's two-year yield added 0.5 bp to 0.355%, while the five-year yield rose 1.5 bps to 0.595%.

The 20-year yield climbed 1.5 bps to 1.88%. The 30-year yield was 1 bp higher at 2.24%.