TOKYO, Jan 27 (Reuters) - Japan's two- and five-year government bond yields rose to their highest in six years on Thursday, after U.S. Federal Reserve signalled an interest rate increase in March.
The two-year JGB yield jumped 1.5 basis points (bps) to minus 0.055%, and the five-year yield gained 1.5 bps to minus 0.010%, their highest since Jan. 29, 2016, when the Bank of Japan introduced the negative interest rates.
In its latest policy update overnight, the Fed indicated it is likely to raise U.S. interest rates in March, as has been widely expected, and reaffirmed plans to end its bond purchases that month before launching a significant reduction in its asset holdings.
Short-term U.S. yields rose to 23-month high and the spread between the U.S. and Japanese two-year yield widened to 124.22 bps, its highest since late February 2020.
The 10-year JGB yield rose 1.5 bps to 0.150% and the 20-year JGB yield rose 2 bps to 0.540%.
The 30-year JGB yield rose 1 bp to 0.730% and the 40-year JGB yield rose 0.5 bp to 0.775%.
Benchmark 10-year JGB futures fell 0.18 point to 150.78, with a trading volume of 16,226 lots. (Reporting by Tokyo markets team; Editing by Rashmi Aich)
