Asian bond yields climbed as investors resumed a weekslong selloff, signaling doubt over the U.S. Treasury Department's plan for bond repurchases.
Secretary Scott Bessent's move this week to ratchet up bond repurchases temporarily cooled yields on government debt, but U.S. yields rebounded overnight near some of their highest levels in years.
"The main theme overnight was a fading of the so-called Bessent put, as markets concluded that the Treasury's bond-buyback program offers only a short-term fix," Commerzbank Research analysts said in a note.
"The combination of rising oil prices and renewed skepticism over the Treasury's ability to cap long-term borrowing costs weighed on U.S. Treasurys."
On Friday, the yield on 10-year Japanese government bonds rose 2.2 basis points to 2.875%, while that on Australia's 10-year government bond increased 3.9 basis points to 5.025%. New Zealand's 10-year sovereign debt yield added 3.7 basis points to 4.736%.
The 30-year U.S. Treasury yield was 1 basis point higher at 5.2508%. Bond yields move inversely to prices.
"The timeline is uncertain given that U.S. Treasury has kept the guidance that it would keep auction sizes unchanged for 'at least the next several quarters,'" OCBC Group Research wrote. "That said, the decision to increase the buybacks suggests that the timeline is not fixed."
Asian stock markets were mixed. Japan's Nikkei Stock Average fell 0.8% and China's Shanghai Composite Index was flat. South Korea's Kospi added 0.6% and Hong Kong's Hang Seng Index rose 0.5%.
"The bond market appears to remain uneasy over the fiscal outlook, with competition for capital becoming an increasingly important part of the equation," market strategist James Ooi of Tiger Brokers said.
Given that AI is one of the key engines of economic growth, "sustaining the AI buildout requires heavy capital spending that increasingly competes with Treasury issuance for the same pool of investor capital," he said.
Asian currencies strengthened slightly against the dollar.
The U.S. dollar fell 0.9% to 1,381.70 won and edged 0.1% lower to 1.2705 Singapore dollars, LSEG data showed.
Meanwhile, oil futures traded cautiously, though prices remained at elevated levels. Front-month WTI crude oil futures were 0.2% lower at $86.61 a barrel, while Brent crude oil futures were flat at $93.74 a barrel.
"Hopes for a near-term peace deal faded after the 60-day negotiating window expired without a breakthrough, prompting some of the earlier optimism priced into crude to unwind," Ooi said.
Still, as markets adjust to the idea of a persistent disruption, and industries start finding alternative routes around the Strait of Hormuz, there may be less room for prices to rise without a fresh escalation or supply losses worsening, he said.
Chang Wei Liang, strategist at DBS Group Research, flagged near-term risks that could lift both the U.S. dollar and bond yields. "An expected tightening of U.S. sanctions on Iran to be announced on Monday could pose unintended consequences, including risks of bolstering inflation expectations," he said.
-- Ronnie Harui contributed to this article.