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LONDON, April 5 (Reuters) - U.S. 10-year Treasury debt yields hit their lowest level in three months on Friday after the Bank of Japan's aggressive stimulus plan stirred speculation of a rise in Japanese investor demand for foreign debt.
The talk also spurred a rally in euro zone debt carrying higher returns than the region's benchmark German bonds but also with high credit ratings, driving Dutch, Belgian, French and Austrian yields to record lows.
Analysts said the Treasuries market was also supported by some nervousness over the U.S. non-farm payrolls number later in the day, after a private labour market report and ISM manufacturing and services figures this week undershot forecasts.
The 10-year T-note yield fell as low as 1.744 percent earlier on Friday, its lowest level since late December before bouncing to last trade at 1.768 percent, little changed from late U.S. trade on Thursday.
The U.S. 30-year T-bond outperformed on the curve, pushing the yield to 2.966 percent, its lowest since early January, with traders citing some buying from pension funds.
"We're seeing decent volumes in (the) cash (market) today and that's why yields pushed lower but we're not seeing the big flows," a trader said.
"There's speculation of whether peripheral markets in the euro zone or our U.S. dollar market will benefit from the BOJ story," he said.
The 10-year Treasury yield had dropped by about 5 basis points on Thursday, as Treasuries received a boost after the BOJ announced plans for massive stimulus to arrest deflation, and pledged to double its Japanese government bond holdings in two years.
Longer-end JGB yields slid earlier on Friday, with the 10-year JGB yield hitting a record low of 0.315 percent at one point. The 10-year JGB yield later rebounded sharply as investors locked in gains, and last stood at 0.515 percent.
Analysts said the monetary expansion plans and an earlier drop in JGB yields had stirred speculation that Japanese investor demand for higher-yielding overseas assets may increase.
"The things that rose were all ones that Japanese players tend to buy, such as Treasuries and MBS (mortgage-backed securities), while French government bonds outperformed in Europe," said Tomoaki Shishido, rate analyst for Nomura Securities in Tokyo.
Some of the earlier activity in the market fizzled out as the near-term focus turned to U.S. jobs data due later on Friday. Employers likely added 200,000 jobs to their payrolls last month, according to a Reuters poll taken before the ADP private jobs report on Wednesday.
Some analysts have cut their forecasts on March payrolls growth toward 150,000 after surprisingly weak March readings in the ADP report and job component in the Institute for Supply Management's services industry survey on Wednesday.