Asian equity markets slipped on Tuesday as investors grappled with a sharp rise in US Treasury yields and higher oil prices. The benchmark 10‑year US Treasury yield jumped to a 19‑year high, topping 5.27% overnight, while the 2‑year yield surged past the 5% threshold. Both moves reflect market expectations that the Federal Reserve will deliver three more rate hikes by mid‑next year.
Impact on regional markets
Higher yields increase borrowing costs for governments, corporations and households, putting pressure on budgets across developed economies. In Japan, South Korea and Australia, bond markets traded lower, and most regional equity indices posted modest declines.
In the United States, a massive $150 billion buyback announcement from chipmaker Nvidia lifted the Nasdaq briefly, but the broader market remained sensitive to rate concerns, limiting gains to a 0.9% rise.
Analyst perspective
“The way to look at expected returns and overall bond yields going forward is that we’re entering a new environment,” said Angus Hui, head of fixed income at Fullerton Fund Management in Singapore. Hui warned that rising interest expenses are stretching sovereign finances in many developed markets, which could curb a bond market recovery if global growth slows.
He added, “Hence we think bond yields are unlikely to go back to the very good old days when bond yields were very, very low.”
Commodity and currency markets
Oil prices held steady, with Brent crude futures at $106.60 a barrel, reflecting no major breakthrough in the Middle East. The US dollar continued its monthly advance, while the Japanese yen hovered around 157.31 per dollar after Japan’s top currency diplomat urged traders to heed concerns over yen weakness. The euro stayed near $1.1367, and the Australian dollar was steady at $0.7012, with the Reserve Bank of Australia’s next rate hike already priced in.
Regional equity highlights
China’s technology sector remained fragile after recent US restrictions on Chinese components for data centres, leaving the CSI300 index pinned at a one‑year low. In Australia, investors priced in a likely rate hike by the Reserve Bank of Australia, with another increase expected by February.
“We question whether the governor can be sufficiently hawkish to shift the market’s current mindset, especially if the decision is not unanimous,” said Damien McColough and Uma Choudhury, rates strategists at Westpac, in a note.
Outlook
Market participants will watch upcoming central‑bank meetings for clues on the pace of future rate hikes. Higher borrowing costs are expected to weigh on corporate earnings and consumer spending, while the bond market adjusts to a new normal of elevated yields.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
