Treasury yields hit new highs, sending Asian stocks lower

Treasury yields hit new highs, sending Asian stocks lower


  • Bond yields are rising in the United States, as investors prepare for tighter monetary policy.
  • After a pipeline interruption in Turkey, oil has reached a new seven-year high.
  • Stocks that are rate-sensitive are leading the market down

News Reuters - TOKYO, Jan 19 - On Wednesday, Asia's stock markets tumbled as U.S. Treasury rates hit new two-year highs and a global technology stock sell-off unnerved investors worried about inflation and bracing for tighter monetary policy in the United States.

Oil prices rose to their highest level since 2014 as a result of an outage on a pipeline connecting Iraq and Turkey, as well as global political concerns, fuelling fears of rising inflation and supporting the dollar, which stayed at one-week highs.

The gloomy tone was reflected in MSCI's broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS), which fell 0.7 percent in mid-afternoon trade following four days of losses.

The Australian dollar (.AXJO) declined 1.0 percent, while the Nikkei (.N225) sank to a three-month low as technology companies tumbled and fears of further corporate restrictions to stem a record rise in coronavirus infections dampened risk appetite. It was down 2.7 percent as of the last trading session.

After gaming rival Microsoft (MSFT.O) said it would buy developer Activision Blizzard, Sony Group (6758.T) shares plummeted to their lowest level since late October, shedding more than 10%. (ATVI.O). 

Despite predictions of more central bank policy easing, South Korea's Kospi (.KS11) fell 1.0%, while China's blue-chip index (.CSI300) fell 0.6%. The Hang Seng index (.HIS) in Hong Kong defied the downward trend and closed flat.

Two-year Treasury rates were last at 1.069%, after touching a high of 1.075%, the highest since February 2020, as traders braced for a more hawkish Federal Reserve ahead of the central bank's policy meeting next week.

"The rapidity with which the short-rate move has occurred raises fears that Asia will have to follow suit in raising rates very soon," said Sean Darby, global equity strategist at Jefferies.

Longer-dated US Treasury yields hit new two-year highs as the likelihood of higher US rates played out worldwide in fixed income markets.

Ten-year rates were up nearly 1 basis point at 1.8842 percent after reaching as high as 1.890 percent earlier in the morning, while five-year yields were at 1.682%, also approaching new two-year highs.

In a note, Rodrigo Catril, a senior FX analyst at National Australia Bank, said, "It appears as if rates are following the traditional historical trend of climbing into the first Fed raise of the cycle."

The dollar index, which measures the value of the dollar against a basket of other key trading partners' currencies, was down a smidgeon at 95.669.

At $0.71915, the Australian dollar was slightly below its 50-day moving average, while sterling was unchanged at 1.3609.

It will be in the spotlight later on Wednesday when British inflation numbers are released, with annual headline inflation likely to hit 5.2 percent, the highest level in a decade.

Oil prices climbed for a fourth day as a pipeline outage from Iraq to Turkey added to concerns about an already tight supply outlook amid geopolitical tensions between Russia and the UAE. find out more

Crude oil in the United States increased 1.36 percent to $86.59 per barrel. Brent crude is now trading at $88.57 per barrel, up 1.21%.

The price of gold was marginally lower. Gold was trading at $1,811.35 per ounce on the spot market.

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