TREASURIES-U.S. yields rise after BOJ's Kuroda mulls end to easy policy

* BOJ may consider exit strategy if inflation goal is reached

* Safe-haven bond holdings pared in wake of Trump's tariff plan

* Traders eye weekend elections in Germany, Italy

NEW YORK, March 2 (Reuters) - U.S. Treasury yields rose on Friday, with the 10-year yield bouncing back from a three-week low as the Bank of Japan's chief hinted at a possible exit from its ultra-easy policies if inflation hits its target in its fiscal 2019. The bond market also came under pressure as investors scaled back their safe-haven bond holdings tied to President Donald Trump's plan for stiff tariffs on steel and aluminum, which raised fears of a trade war and surging costs for consumers.

"Markets don't want trade wars. The markets are pricing in that risk," said Boris Rjavinski, senior rate strategist at Wells Fargo Securities in New York. "The news from Japan also played a role." If the BOJ were to move away from its crisis-mode measures, it would follow in the footsteps of the U.S. Federal Reserve and other major central banks. "The BOJ's board members expect that prices will reach 2 percent around fiscal 2019. If this happens, there's no doubt that we will consider and debate an exit," Bank of Japan Governor Haruhiko Kuroda told parliament. At 10:18 a.m. (1518 GMT), the benchmark 10-year Treasury yield was 2.837 percent, up 3.5 basis points from late on Thursday. It touched a three-week low of 2.793 percent earlier on Friday. The two-year yield hit a two-week low of 2.197 percent before moving to 2.234 percent, up 2.8 basis points from Thursday, according to Reuters data. The spread between five-year and 30-year yields was 51.0 basis points, wider than the 50.2 basis points late on Thursday, Tradeweb data showed. Bond yields had fallen late Thursday through overnight trading on jitters about rising trade tension from Trump's tariffs on imported steel and aluminum before the BOJ news reversed their drop. Some analysts downplayed the economic risk from an all-out trade war. "We expect it would make continued noise for markets," said Robert Tipp, chief market strategist at PGIM Fixed Income in Newark, New Jersey. "I think it's not going to make a dent in the overall economic picture." Meanwhile, traders await the outcomes of elections in Germany and Italy on Sunday. Pollsters forecast a hung parliament in Italy, with the anti-establishment 5-Star Movement to be the biggest single party. In Germany, Chancellor Angela Merkel's ruling conservative party faces stiff resistance from the Social Democrats (SPD) to be part of an alliance.

Election results that produce weak governing bodies or ones with anti-EU bias may spur safe-haven demand for Treasuries, analysts said. March 2 Friday 10:22AM New York / 1522 GMT Price

US T BONDS MAR8 144-26/32 -17/32 10YR TNotes MAR8 120-240/256 -9/32 Price Current Net Yield % Change


Three-month bills 1.605 1.6336 0.005 Six-month bills 1.8075 1.8491 0.010 Two-year note 100-8/256 2.2337 0.028 Three-year note 99-160/256 2.3822 0.030 Five-year note 100-22/256 2.6065 0.033 Seven-year note 99-228/256 2.7673 0.038 10-year note 99-64/256 2.8369 0.035 30-year bond 97-180/256 3.1185 0.033 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 60.10 0.70 30-year vs 5-year yield 51.20 1.00


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 24.25 -1.75


U.S. 3-year dollar swap 20.50 -1.75


U.S. 5-year dollar swap 9.00 -0.75


U.S. 10-year dollar swap 0.75 0.00


U.S. 30-year dollar swap -19.00 0.00


(Reporting by Richard Leong; Editing by Jonathan Oatis)