TOKYO, March 14 (Reuters) - Japanese government bond yields rose on Thursday, as market bets firmed for the Bank of Japan to start exiting stimulus as soon as next week, while a weak auction of 20-year securities added to selling pressure.
An advance in U.S. bond yields overnight also lifted Japanese yields, as traders considered the view that the Federal Reserve might not cut interest rates until after June.
The 10-year JGB yield rose 2.5 basis points to 0.780% as of 0420 GMT, reaching its highest level since Dec. 11.
Bumper annual pay rises by Japan Inc have boosted bets that BOJ could exit its negative interest rate policy (NIRP) at its two-day meeting ending Tuesday.
Reuters reported this week, citing sources, that the BOJ will likely offer numerical guidance on how much government bonds it will buy upon ending NIRP and yield curve control (YCC) to avoid causing market disruptions. An end of YCC is likely to coincide with an exit from NIRP, the sources said.
"Despite the markets hand-wringing over March versus April, we think the most important takeaway is that the BOJ has effectively made up its mind to move by the end of the spring," BofA Securities strategists wrote in a client note.
The BOJ is more likely to exit stimulus at next week's meeting, but whenever it happens, the BOJ "is likely to keep its excessive JGB purchases, which should contain a rise in JGB yields", the strategists added.
The 20-year JGB yield advanced 3.5 bps to 1.555%, after earlier touching 1.56% for the first time since Feb. 1. The 30-year JGB yield added 4 bps to 1.845%, after hitting 1.850% for the first time since Jan. 24.
The two-year JGB yield rose 0.5 bp to 0.195%. The five-year yield rose 1 bp to 0.380%.
Benchmark 10-year JGB futures fell 0.28 yen to 145.24. (Reporting by Kevin Buckland; Editing by Rashmi Aich)
