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Global bond markets dropped on Monday after the Bank of Japan signalled that it could raise interest rates later this month.
Japan’s two-year government bond yield, which is particularly sensitive to rate expectations, jumped above 1 per cent for the first time since 2008 on Monday after Bank of Japan governor Kazuo Ueda indicated that the central bank might raise interest rates this month. Longer-term debt also fell, with the 10-year yield up 0.07 percentage points to 1.87 per cent.
The jump in Japanese yields, which move inversely with price, rippled through global fixed income markets, sparking steep declines from Germany to the US.
US Treasury yields on Monday recorded their biggest daily rise in a month, with the two-year rising 0.04 percentage points to 3.52 per cent as traders scaled back expectations of interest rate cuts in 2026. The benchmark 10-year yield rose 0.07 percentage points to 4.08 per cent. The 10-year German Bund yield climbed 0.06 percentage points to 2.75 per cent.
“Global bonds are feeling the butterfly effect following the Bank of Japan’s hawkish signal to prepare for a December rate hike. One central bank across the world just decreased additional rate cut odds in 2026 for the US,” said Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments.
Traders in the US futures market pulled back expectations of interest rate cuts in 2026, with three or four priced in by next December. Expectations, however, of a rate cut this month rose modestly and a quarter-point decrease is now fully priced in by the market.
The global move in bonds also reflected the possibility that with access to higher-yielding bonds at home, Japanese investors may bring cash back home, decreasing demand for foreign government bonds.
“The more it becomes clear that Japanese rates . . . are normalising, the higher the probability that Japanese investors begin to repatriate funds from foreign bond markets or at the very least buy fewer foreign bonds, removing a key source of international finance at a time when sovereign issuance is surging,” said Michael Metcalfe, head of macro strategy at State Street Markets.
Japan’s yen also rallied around 0.7 per cent against the US dollar to ¥155.1 as traders sharpened bets on higher rates.
Investors are bracing themselves for a string of US economic data this week, including ADP payrolls figures, ahead of the Federal Reserve’s decision on interest rates on December 10.
Also on Monday, US stocks dropped, led lower by tech companies, as investors scaled back exposure to risky assets. Wall Street’s tech-heavy Nasdaq Composite index was down 0.7 per cent in mid-morning trading and the S&P 500 weakened 0.6 per cent.
Bitcoin was also under pressure, falling 7 per cent and taking the cryptocurrency’s drop over the past month to more than 20 per cent.
The downbeat start to December follows a shaky November for tech stocks, which broke their monthly winning streak as concerns grew over the valuation of artificial intelligence companies.
Analysts said that the sliding bitcoin price was hurting sentiment across other risky assets, including tech stocks.
“Today’s pullback in equities is correlated with the strong dip in crypto assets,” said Max Kettner, chief multi-asset strategist at HSBC, adding that the correlation between cryptocurrencies and other risky assets such as stocks has been a theme of recent trading sessions.
Kettner added that “beyond near-term sentiment, we have very strong doubts about any causal relationship between crypto and equities . . . [crypto] has no bearing on the inflation, rates, growth or earnings outlook.”
European stocks also fell on Monday. The Stoxx Europe 600 was 0.3 per cent lower by mid-afternoon trading, and Germany’s Dax dropped 1 per cent.
Spain is battling to keep its pork exports flowing after the country’s first outbreak of African swine fever in 30 years prompted several countries to limit purchases from Europe’s biggest pig meat producer.
One-third of Spanish pork export certificates remained blocked by foreign governments on Monday as Madrid grappled with the fallout from two confirmed swine fever cases in wild boars and eight suspected cases in the Barcelona region.
The nascent emergency in Spain, which exports nearly €9bn of pork meat and related products each year, comes as Italy recovers from a swine fever outbreak on 25 farms last year that led to the culling of 50,000 pigs.
Japan and Mexico have halted all imports of Spanish pork products because of the outbreak while China, the world’s biggest buyer of Spanish pig meat, has blocked imports from the province of Barcelona, according to Spain’s agriculture ministry.
Swine fever does not affect human health but it spreads rapidly among pigs and wild boars and is nearly always lethal. The virus can spread not just via infected animals but also on shoes, car tyres and even in cooked meats. It was last recorded in Spain in 1994.
Luis Planas, Spain’s agriculture minister, told the EFE news agency on Monday that Madrid was working to “contain, reduce and eliminate the source in order to prevent any spread” to farms, while seeking to mitigate the negative impact on exports.
Pork products in Spain, a country devoted to jamón ibérico, are a pillar of national agriculture. Pork meat, a category excluding derivative products, was the country’s second-largest agricultural export last year, accounting for €6.09bn of sales versus €6.16bn for olive oil, the top export.
Planas said 58 per cent of Spain’s pork exports went to other EU members. Under EU rules, a ban on Spanish exports applies only to products from within a 20km zone around the source of the outbreak.
Overall, the swine fever cases have prompted foreign governments to block 120 out of 400 export certificates for Spanish pork, the agriculture ministry said.
As a bloc the EU is the world’s second-largest pork producer after China, with the bulk of output coming from Spain, Germany and France.
On Monday, 80 soldiers from Spain’s Military Emergency Unit were dispatched to the Catalonia region where the outbreak occurred to join several hundred police officers and Civil Protection Agency officials in wildlife control efforts, centred on trapping boars and managing carcasses.
Òscar Ordeig, the top agricultural official in the region, predicted that the eight suspected cases of swine fever would be confirmed.
He said it would be “terrible” if the outbreak were not brought under control and said it was vital to “underscore how serious the situation is”.
Spain’s pork industry employs 400,000 people directly and indirectly, according to a report by trade association Interporc and the banking group Cajamar.
Planas sent a “message of reassurance” to Spanish citizens, telling them it was safe to eat fresh pork meat and processed pork products.
Although the situation in Italy is improving after the worst swine fever outbreak since the 1960s last year, China and Japan remain closed to Italian pork exports.
Davide Calderone, director of Assica, an Italian pork industry trade association, said there had been no new outbreaks of swine fever on farms in 2025. “This is definitely a good sign,” he said. “We producers know that it takes time, but at least we can see that we are heading in the right direction.”
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