Japanese government bond (JGB) yields climbed across the curve on Friday, with several tenors reaching record highs on rising bets for Bank of Japan interest rate hikes amid building inflationary pressures.
The benchmark 10-year JGB yield rose as much as 10 basis points (bps) to 2.73%, the highest level since May 1997. The yields on five-year notes and 20-year bonds touched all-time peaks of 2.00% and 3.615%, respectively. Yields move inversely to bond prices.
JGB yields extended their climb after official data showed wholesale inflation rose at the fastest pace in three years in April, bolstering expectations the central bank will tighten policy at its next meeting in June.
Japanese yields also got a boost from a jump in U.S. Treasury yields, which hit 11-month highs as traders wagered the Federal Reserve will need to tighten policy, with the protracted conflict in the Middle East keeping oil prices well above $100 a barrel and fanning inflation worries across the globe.
"Barring a large-scale cessation of economic activity due to Iran war-related supply constraints becoming a real possibility, we continue to see a high likelihood that the Bank of Japan will implement a rate hike at the June meeting," said Noriatsu Tanji, chief bond strategist at Mizuho Securities, pointing to a hawkish shift in recent comments from central bank policymakers.
Tokyo Tanshi interest rate swaps data on Friday indicated a 78% chance of a quarter-point hike on June 16.
Japan's two-year yields, which tend to be the most sensitive to monetary policy expectations, rose as much as 2 bps to 1.415%, the highest since May 1995.
The 30-year yield touched 3.925%, matching a record high from Thursday.
