Asian equities stay steady as US bond yields hit two-decade highs
Asian stock markets held firm on Friday despite a sharp rise in long-term US Treasury yields, while oil prices slipped modestly and the US dollar gained against most currencies.
Asian equity markets remained stable on Friday as long-dated US Treasury yields climbed to their highest levels in about twenty years, raising borrowing costs globally. Futures for pan-Asian stocks were up about 0.6% ahead of the European open, and Brent crude fell 1.2% to $105.3 a barrel after an earlier rally.
The 10-year US Treasury yield edged higher to 5.175%, after a two-day surge that set a 19-year peak of 5.225%. Thirty-year yields reached 5.467%, the highest since 2004, pushing US mortgage rates toward 7%. Japanese 10-year government bond yields rose to 3.115%, a level not seen since 1996, while Australian 10-year yields increased to 5.394%.
"The world's bond markets are screaming, and ignoring it could prove very expensive," said Nigel Green, chief executive of deVere Group.
"Once risk-free rates sit above 5% in the world's largest economy, every asset on the planet has to justify its price against that. Equities, property, private credit, emerging market debt – nothing's immune," Green added.
Federal Reserve futures now suggest a 73% probability of another rate hike next month, up from about 53% earlier in the week, indicating more than 90 basis points of tightening remain in this cycle. The US dollar rose 1% against a basket of major currencies, reaching 101.22, while losing 0.4% against the yen after comments from Japan's finance minister.
In other news, Chinese President Xi Jinping met US President Donald Trump in Washington, but officials noted limited progress on issues such as artificial intelligence, trade, Taiwan and the conflict with Iran. Central banks in Norway and Sweden signaled further rate increases, while Mexico's Banxico kept rates steady but revised its guidance on future policy.