TOKYO: Japanese government bond yields rose sharply on Monday, tracking a jump in Treasury yields after robust US labour market data knocked back bets for Federal Reserve interest rate cuts.

Japanese yields were also supported by speculation of a hawkish shift at the Bank of Japan’s two-day meeting that ends Friday, as policymakers send hints of a reduction in the central bank’s monthly bond purchases.

The 10-year JGB yield rose 4.5 basis points (bps) to 1.015% as of 0530 GMT, further bouncing from Thursday’s three-week low of 0.995%.

The yield had climbed to a 13-year peak of 1.1% at the end of last month before getting dragged back by falling Treasury yields amid a run of soft US macro data. While the direction for US and Japanese monetary policy is not at issue, the speed and timing of each has become the dominant theme in the JGB market.

Wagers for a quarter-point rate cut from the Fed by September currently stand at 47%, down from more than 60% a week earlier, according to the CME Group’s FedWatch Tool.

Meanwhile, the BOJ isn’t expected to raise rates again on Friday, but could begin the process of quantitative tightening (QT), or signal that it’s imminent.

Japan’s 2 year bond yield hits 13-year high as BOJ chief hints chance of another rate hike

“The focus is twofold: whether the BOJ signals an upcoming rate hike, and guidance on QT,” Shinichiro Kadota, head of Japan FX and rates strategy at Barclays said, forecasting a July rate increase.

“The former could put upward pressure on front-end yields as markets have only priced about a 50% chance of a hike for July, and the latter on longer-tenor sectors where the BOJ’s presence is larger.”

The two-year JGB yield rose 3 bps to 0.375%, while the five-year yield climbed 5 bps to 0.600%. The 20-year yield gained 6.5 bps to 1.835%.

The 30-year yield advanced 7 bps to 2.160%.