(Bloomberg) -- Bond markets returning from the holidays joined a global yield surge that prompted additional purchases from the Bank of Japan.

The central bank announced an unscheduled bond buying operation as Wednesday’s rise in global yields threatened to spill over to Japan. Earlier this month, the BOJ raised its tolerated ceiling for 10-year yields, surprising investors.

The yield on UK 10-year bonds rose five basis points to 3.69% after a two-day holiday while Australian equivalents climbed 21 basis points to 4.04% amid concern that China’s reopening will keep cause high inflation to linger. US and European bonds, which fell Tuesday, failed to sustain a recovery on Wednesday.

Ten and 30-year Treasury yields rose to new monthly highs, exceeding their 50-day averages. The 10-year rose as much as 4.5 basis points to 3.89%, the highest since Nov. 10. The selloff is pushing yields back toward multi-year highs reached in October, before inflation began to show signs of moderating.

Some investors fret that a rapid reopening of the world’s second-largest economy could delay an expected retreat in inflation next year and weigh on global bonds. Still, moves are being exacerbated by holiday-thinned trading and year-end positioning and others caution about reading too much into significant swings in yields.

“Reopening is fueling inflation risks,” said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. “The moves may feel overdone, but the fact is that most investors will be returning in the new year to a set of assumptions far different to when they left on break.”

BOJ Action

The BOJ offered to buy unlimited amounts of two-year notes at a fixed yield of 0.03% and five-year debt at 0.24%, among other purchases. That’s in addition to its standing daily offer to purchase unlimited quantities of benchmark 10-year bonds at the central bank’s policy ceiling of 0.5%. 

BOJ Governor Haruhiko Kuroda had stressed Monday that the bank’s recent tweaks to its bond yield control program were not the beginning of an exit of monetary easing, but a way to make it sustainable and run smoothly. 

Read: BOJ Members Flag Bond Market Dysfunction, Not Policy Change Need

“The BOJ is trying to stop a rise in medium-term yields that’s driven by speculation of an end to its negative-rate policy,” said Eiji Dohke, chief bond strategist at SBI Securities Co. in Tokyo. But “such speculation is unlikely to disappear. The BOJ will have to keep buying as yields stay under upward pressure.”

China said Monday it will no longer subject inbound travelers to quarantine from Jan. 8, putting the country on track to emerge from three years of self-imposed global isolation.

“With the BoJ as the last dove biting the dust and China reopening front loading upside risk on inflation, the debate in the New Year will be how high can bond yields go,” said TD’s Newnaha.

--With assistance from Michael G. Wilson, Greg Ritchie and Aline Oyamada.

(Updates bond moves throughout.)

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