Japan bond yields diverge as investors weigh inflation, BOJ outlook

By Rocky Swift

TOKYO, Oct 13 (Reuters) - Japanese government bond (JGB) yields moved in opposite directions on Tuesday, with shorter-term yields edging higher while the long end declined as investors weighed persistent inflation signals and the central bank's policy outlook.

• The 2-year yield JP2YTN=JBTC, the tenor most sensitive to Bank of Japan policy rates, rose 1 basis point (bp) to 1.915%, while the 5-year yield JP5YTN=JBTC climbed 1.5 bps to 2.350%.

• The 30-year JGB yield JP30YTN=JBTC slipped 1 bp to 4.045%, marking a fourth consecutive session of declines. The 40-year yield JP40YTN=JBTC, Japan's longest-dated benchmark, and the 20-year yield JP20YTN=JBTC were unchanged.

• Global bond markets offered little direction as US Treasuries trading was closed for Columbus Day on Monday, while euro zone yields edged lower amid mixed energy prices and contained geopolitical risks.

• Market participants continued to monitor the BOJ's stance after its September rate hike and recent signals that further tightening remains possible, with expectations leaning toward another 25-basis-point hike by year-end.

• Data on Tuesday showed Japan's wholesale prices rose 6.8% year-on-year in September, slowing from 7.6% in August and undershooting forecasts. Import prices surged 24.5% on yen weakness, reinforcing concerns about persistent inflation pressures.

• "Long and super-long yields fell relatively sharply late last week in particular, but this was no more than a rebound from earlier moves, and we remain cautious about whether the trend can last," Keisuke Tsuruta, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, wrote in a note.

• The benchmark 10-year JGB yield JP10YTN=JBTC held steady at 3.01%.

(Reporting by Rocky Swift in Tokyo; Editing by Sherry Jacob-Phillips)

((rocky.swift@thomsonreuters.com;))