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JGB yields rise with US peers, yen steady as Fed outcome awaited

By Kevin Buckland

TOKYO, May 1 (Reuters) - Japanese government bond yields climbed on Wednesday, tracking a rise for U.S. Treasury yields ahead of the conclusion of the Federal Reserve's two-day policy meeting later in the day.

The yen was steady at 157.87 per dollar following two days of volatile trade that saw it tumble beyond 160 for the first time in 34 years and then spring back as far as 154.40 in what now looks almost certain to have been intervention by Japanese authorities.

The 10-year JGB yield rose 2 basis points to 0.89% as of 0543 GMT on Wednesday, recouping some ground lost the previous day, when it fell as low as 0.865%. Monday was a national holiday in Japan, forcing local investors to catch up with two days of declines for U.S. yields.

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The U.S. 10-year Treasury yield was little changed at 4.6862%, after rising 7 bps on Tuesday following heated labour data that keeps pressure on the Fed to hold off on rate cuts.

With the U.S. central bank universally expected to keep rates steady on Wednesday, the focus will be on Chair Jerome Powell's post-meeting news conference, where he is likely to retain his recent hawkish tone amid robust economic data and stubborn inflation.

Japan's benchmark bond yield had reached a six-month high of 0.93% on Friday, but fell back after the Bank of Japan left policy settings unchanged, including the amount of JGBs it buys each month.

Amid a dearth of domestic drivers, Japanese bond investors have little choice but to focus on the United States for trading cues, said Norihiro Yamaguchi, a senior economist at Oxford Economics, who doesn't expect the BOJ to taper bond purchases until the final quarter of 2024, following a rate hike in September.

The Japanese central bank raised rates for the first time since 2007 in March.

The two-year JGB yield rose 1.5 bps to 0.285%, while the five-year yield added 2 bps to 0.490%.

The 20-year yield advanced 2.5 bps to 1.670%. The 30-year yield climbed 3.5 bps to 1.965%.

Benchmark 10-year JGB futures fell 0.2 yen to 144.3. Yields rise when bond prices fall. (Reporting by Kevin Buckland; Editing by Subhranshu Sahu)