Investors worldwide felt the pressure on Tuesday as bond yields climbed to levels not seen in nearly two years. The 10‑year U.S. Treasury yield rose 2.2 basis points to 4.78%, while Japan’s 10‑year benchmark approached 3%, a threshold last observed a generation ago.
U.S. equity futures steadied after Wall Street indices posted modest overnight declines. Yet traders remained uneasy ahead of the upcoming U.S. employment report, which could open the door for the Federal Reserve, under Chair Kevin Warsh, to begin an interest‑rate‑raising cycle as early as this month.
Geopolitical sparks lift oil and inflation worries
Renewed fighting in the Middle East pushed Brent crude futures above $91 a barrel in Asian trade, adding to concerns about inflation. Higher oil prices, combined with escalating U.S.–Iran tensions, have revived fears that price pressures could linger, a scenario that is typically negative for bonds.
Warsh signaled in a late‑week speech that policymakers are prepared to act if inflation does not ease, reinforcing the market’s perception of a more hawkish monetary stance.
Analyst outlook
Wee Khoon Chong, APAC macro strategist at BNY, warned that “the macro mix is turning more challenging for duration and risk assets.” He cited hawkish monetary policy, renewed geopolitical and inflation risks, and rising fiscal concerns as forces maintaining upward pressure on global term premiums and long‑end yields.
In Asia, Japan’s Nikkei slipped 0.2% and Hong Kong’s Hang Seng fell 0.7%, the latter weighed down by a lackluster debut of fast‑fashion retailer Shein Global. German and French long‑bond yields reached 15‑year highs, while French OAT futures fell to their lowest levels since 2012.
Currency and commodity markets
The U.S. dollar saw limited support despite the global rise in borrowing costs. The euro held steady at $1.1619 and the yen at 159.76 per dollar. Europe’s benchmark gas price closed at a more than three‑and‑a‑half‑year high on Monday.
Markets are pricing in a possible interest‑rate hike in New Zealand on Wednesday and an increase in Europe next week. Odds of rate hikes this month in the United States and Japan are better than even.
Impact on businesses
Shein, known for its low‑cost apparel, continues to face tariff and duty challenges in the United States and Europe that have eroded a key pillar of its business model. Shares slipped in early Hong Kong trade, underscoring the broader market’s sensitivity to both macroeconomic and company‑specific developments.
Overall, the confluence of higher oil prices, geopolitical tension, and the prospect of tighter monetary policy is creating a cautious backdrop for investors, with bond markets leading the charge.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
