JGB 10-year yield hits 7-mth high in nervous trade

By Rika Otsuka

TOKYO, May 16 (Reuters) - The benchmark 10-year Japanese government bond yield climbed to a seven-month high on Friday as nervous investors dumped government debt after a disappointing Bank of Japan buying operation.

The move started as traders were looking to sell some seven- to 10-year paper to the BOJ in its regular "rinban" operation for buying 300 billion yen ($2.9 billion) in JGBs outright. But they were unable to do so as others sold notes with shorter maturities in an unexpectedly large amount.

When the central bank could not take on the bonds, traders sold them in the cash market, prompting other jittery investors to also dump JGBs.

"The results of the JGB buying operation showed how much traders wanted to get rid of their bond holdings," said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Securities.

June 10-year futures fell as low as 134.37 2JGBv1, down 0.78 point on the day and in sight of a seven-month low of 134.28 hit on Wednesday. They recovered a bit to 134.59, down 0.56 point.

The benchmark 10-year yield rose 3 basis points to 1.700 percent <JP10YTN=JBTC>, after hitting a fresh seven-month high of 1.710 percent.

JGBs were suffering sharp moves as the volatility of the past two months has prompted hedge funds and other players to pull back from the market, hurting liquidity and exacerbating such swings. (Editing by Chris Gallagher)