Japan 2-year yields rise to 31-year high as auctions, rate hikes loom

TOKYO, Aug. 31 (Reuters) - The two-year Japanese government bond (JGB) yield rose to a 31-year high on Monday amid rising bets on central bank rate hikes and an uncertain environment for debt auctions later in the week.

Here are a few details:

• The two-year yield JP2YTN=JBTC, the one most sensitive to Bank of Japan policy rates, added 0.5 basis point (bp) to 1.730%, a level not seen since April 1995. The benchmark 10-year JGB yield JP10YTN=JBTC climbed 1 bp to 2.935%. Yields move inversely to bond prices.
• The U.S. central bank will "have work to do" if policymakers don't get the confidence they need that inflation is heading down to 2%, Federal Reserve Chairman Kevin Warsh said on Friday, coming closer than he has to acknowledging interest rate hikes may be needed.
• Japan's Ministry of Finance is due to auction 10-year JGBs on Tuesday and 30-year debt on Thursday.
• "If the Fed tightens monetary policy further to curb inflation, the environment for the Bank of Japan and the JGB market will become increasingly challenging," Ataru Okumura, a senior rate strategist at SMBC Nikko Securities, said in a note. "It is unclear whether investor demand will materialise for this week's 10-year and 30-year bond auctions."
• Data on Friday showed the Tokyo consumer price index (CPI) rose in August, bolstering the case for a BOJ interest rate hike next month.
• The CPI data "really reinforces a more hawkish stance from the BOJ," ANZ's head of FX research, Mahjabeen Zaman, said.
• "We now expect the BOJ to hike by 25 basis points in the September meeting followed by consecutive moves over the next quarters, taking the terminal rate to 1.75%," she added.
• The 30-year JGB yield JP30YTN=JBTC rose 1.5 bps to 4.135%.