* U.S. 30-year, 10-year yields hit 11-week high
* JGB yields rise as well
* Fed's officials divided ahead of September FOMC
(Adds comment, prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 9 U.S. Treasury yields rose on
Friday, with long-dated maturities reaching more than two-month
highs, in line with Japanese government bonds, after reports
suggested the Bank of Japan is considering measures to cut
short- to medium-term yields, while lifting those of long-term
The U.S. Treasury market has been moving in tandem with JGBs
over the last six months, analysts said, since Japanese
investors of late have been the biggest buyers of U.S.
U.S. 10-year note and 30-year bond yields, which move
inversely to prices, rose to 11-week peaks. The rise in yields
was across the board, with U.S. 7-year notes touching the
highest in more than two months and 5-year notes rising to a
Sources on Friday said the BOJ is studying options to
steepen the yield curve, as authorities desperately seek policy
tools to revive an economy that has remained stagnant despite
years of massive stimulus.
As a result, the 20-year JGB yield rose to a five-month high
of 0.435 percent, while the 30-year JGB yield
added 7 basis points to 0.515 percent.
A plan by the BOJ to steepen the JGB curve could have
negative consequences for U.S. Treasuries, since any attempt to
push long-term yields higher would make JGBs attractive once
again to Japanese investors, said Gennadiy Goldberg, interest
rates strategist at TD Securities in New York.
That could potentially reduce Japanese flows into
Treasuries, he added.
Japanese investors were big buyers of foreign bonds in July,
amassing about $47 billion, the second largest for data going
back to 2005. The majority of that flow was in U.S. Treasuries,
"There are a lot of cross-market correlations between JGBs
and Treasuries as well as Bunds and Treasuries and we're
constantly looking overseas to see what demand is going to be
for overseas accounts, or cash bonds in the U.S.," said Subadra
Rajappa, head of rates strategy at Societe Generale in New York.
"A shift in the dynamic on overseas purchases from Japan has
the potential to impact Treasuries," she added.
In late New York trading, benchmark 10-year Treasury notes
were down 16/32 in price to yield 1.673 percent,
compared with 1.616 percent late on Thursday. Yields rose as
high as 1.678 percent, an 11-week high.
The 30-year Treasury bond fell more than a point
in price to yield 2.392 percent, compared with 2.322 percent on
U.S. Federal Reserve officials took center stage on Friday,
but came out divided on whether rates would rise at this months'
Late Friday, Fed funds futures indicated that investors see
a 30 percent chance of a rate increase at the Federal Open
Market Committee meeting this month, up from 18 percent late on
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky and Cynthia Osterman)