Global Rate-Tightening Cycle Takes Shape as BoJ Raises Rates

The global interest rate tightening cycle is gaining momentum as major central banks raise rates and hint at further increases. The Bank of Japan (BoJ) raised its interest rates to a 31-year high on Friday, with Governor indicating that the BoJ has entered a new phase aimed at preventing inflation from exceeding its target.

The Federal Reserve also hiked rates earlier in the week, with Chairman Kevin Warsh making hawkish comments following the decision. This has led to concerns about inflation and sparked expectations of additional rate increases.

US Treasury yields have climbed to their highest level since July 2024, reflecting investors' assessment of the interest rate outlook. The yield curve between 2- and US2US10=TWEB is currently at 25.5 basis points, its flattest since June 25.