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[US Treasury yields mostly rose and the yield curve flattened after the Bank of Japan's rate hike] ⑴ The Bank of Japan raised its overnight interest rate to 1.25%, the highest since 1995. The decision was in line with expectations, but two committee members dissented. US Treasury yields mostly rose, the yield curve flattened, the yen weakened, stock markets were expected to open higher, and oil prices fell by more than 1%. ⑶ The central bank's statement said that the Japanese economy is expected to continue to grow moderately, despite uncertainties in the Middle East. It also mentioned increased global demand related to artificial intelligence, producer price inflation remained high, and consumer prices rose moderately. ⑸ The statement also said that given the accommodative financial conditions, the central bank believes it is appropriate to adjust the degree of monetary easing from the perspective of achieving the 2% price target sustainably and stably, and emphasized that financial conditions will remain accommodative after the rate hike. ⑹ Regarding future actions, the central bank said it will consider adjusting the timing and pace, while reviewing the likelihood and risks of achieving the baseline scenario for economic activity and price outlook, including the Middle East situation, the expansion of demand for artificial intelligence, and exchange rate trends. (7) The central bank governor stated at a press conference that whether to raise interest rates significantly or continuously depends on whether Japan faces significant inflation risks or whether inflation significantly exceeds the target. Underlying inflation has not yet exceeded 2%, and the central bank hopes to maintain this state, thus favoring a preemptive approach. (8) He also responded to the US Treasury Secretary, stating that policy guidance focuses on how exchange rate fluctuations affect domestic inflation, rather than guiding policy to control or stabilize the exchange rate within a certain range. (9) Despite some hawkish statements in the statement and press conference, the two dissenting voices made the overall assessment of this rate hike dovish, resulting in a weak performance for the yen. The USD/JPY exchange rate fluctuated between 155.96 and 158.05, last trading at approximately 157.77, up about 1.2%. (10) Japanese government bond yields for 2- to 30-year bonds closed down 0.5 to 2 basis points, while the 40-year yield rose by about 1.5 basis points. (11) The yield on the 10-year U.S. Treasury note fell for the third consecutive trading day from its previous high, reaching a weekly low of approximately 4.92%, still about 10 basis points above the Bollinger Band's middle line, and currently about 1 basis point lower than Friday's closing price of approximately 4.975%. (12) The yield curve has flattened most significantly since Wednesday's Fed meeting, with both bond and stock volatility declining sharply. The market seems to be more accustomed to the Fed Chairman's tone. Next week, attention will be focused on month-end supply and speeches by Fed officials. The Treasury will auction approximately $183 billion in 2-year, 5-year, and 7-year Treasury notes and approximately $28 billion in 2-year floating-rate notes.