The Bank of Japan's "hawkish" stance affects global bond markets, causing US bond yields to rise.

After the first trading week following Thanksgiving, the U.S. Treasury market started off poorly, as the drop in Japanese government bond prices affected global bond markets. The yield on the U.S. 10-year Treasury rose by 3 basis points to 4.04%. Earlier, the yield on similar bonds in Japan rose significantly to its highest level since 2008, as the market anticipated the Bank of Japan raising interest rates later this month, which also pushed up bond yields from Europe to New Zealand. The 2-year Japanese government bond rate, the most sensitive indicator to changes in monetary policy, broke through 1% for the first time in 17 years. This change was driven by Bank of Japan Governor Haruhiko Kuroda emphasizing the possibility of raising interest rates, leading financial markets to increase the likelihood of a rate hike on December 19 from less than 25% a week ago to about 80%. As the Bank of Japan controls the gate to global yen liquidity supply, U.S. bond traders remain highly sensitive to the Bank of Japan's policies. The increase in Japanese interest rates may prompt Japanese investors to allocate more funds into domestic government bonds rather than investing in higher-yielding assets overseas, such as U.S. Treasury bonds. With the expectation of a possible rate cut by the Federal Reserve, U.S. Treasury yields fluctuated near 4%. Last week, New York Fed President John Williams remarked that there may be room for a rate cut in the short term, causing U.S. Treasury yields to fall below this level. Traders believe there is an 80% possibility that the Fed will cut rates again this month. Previously, President Trump announced on Sunday that he had decided on the next nominee for Fed Chair. It is likely that White House National Economic Council Director Kevin Hassett will be appointed, as he is a frontrunner to succeed Powell. According to insiders, Trump trusts Hassett and believes he shares his desire for more aggressive rate cuts by the Fed. Investors will also closely monitor the Institute for Supply Management's manufacturing data for November, to gain insights into the outlook of U.S. monetary policy. Economists predict that overall data will slightly improve, while the component of prices paid will decrease. RBC strategist Evelyne Gomez-Liechti said, "This may be enough to prove that the downward pressure we are currently seeing is justified."