Asian Bonds Fall, Tracking Treasurys Amid Signs of Regional Growth

Dow Jones
1 hour ago
 
 

Government bonds across Asia-Pacific fell, tracking U.S. Treasurys overnight, even as signs of regional economic growth supported the case for further tightening of monetary policy by Asian central banks.

Regional bonds were weighed Thursday after U.S. Treasurys dropped overnight with the 10-year Treasury yield briefly going above 5.3%, hitting its highest level since 2002. Bond yields move inversely to prices.

The 5% level on the U.S. 10-year Treasury yield was an important psychological threshold for investors, effectively marking the upper end of the range since the post-Covid period, said David Clewell, portfolio manager for multi-asset global income strategy at T. Rowe Price. Once a key technical level like this is breached, systematic and quantitative positioning can amplify the move and lead to further selling, he said.

Given the resilience of U.S. economic growth, there is a credible case for the 10-year Treasury yield to rise toward 5.5% to 6.0%, Clewell added.

The yield on U.S. 10-year Treasurys was 2 basis points higher in Asian trade at 5.289%, according to FactSet data.

In Japan, a central bank survey Thursday showed large Japanese manufacturers became more optimistic about business conditions in the third quarter as worries about energy shortages receded. The gauge, known as the tankan, is widely perceived as a leading indicator of Japanese corporate health.

The index measuring sentiment among big manufacturers posted its the highest reading since March 2018. The survey is closely watched for clues regarding the timing of the central bank's next interest-rate hike.

"The survey showed that overall business conditions were the most favourable in decades, which should encourage the Bank of Japan to keep tightening policy at a faster pace," Capital Economics' Marcel Thieliant said in commentary.

Also, the "survey won't dispel the BOJ's concerns about upside risks to inflation and we're sticking to our view that the [central] bank will lift its policy rate to 2% by mid-2027," the head of Asia-Pacific added.

The yield on Japan's 10-year government bonds rose 2.5 basis points to 3.085%, according to data provider Quick. The yield on Australia's 10-year government bond gained 7 basis points to 5.411% and New Zealand's 10-year bond yield added 6 basis points to 5.104%, FactSet data showed.

Oil futures declined amid signs of rising crude exports from the Middle East.

"Exports from the Persian Gulf have been rising strongly over the past week, with some estimates putting the flows nearing levels" before the U.S-Iran conflict, ANZ Research analysts said in a research report. Satellite tracking firm Kpler estimates that shipments reached 12.5 million barrels per day during the week ended Sept. 27, just 1 million barrels a day below the pre-conflict baseline, the analysts noted.

Front-month West Texas Intermediate crude oil futures eased 0.4% to $90.07 per barrel and front-month Brent crude oil futures were 0.2% lower at $97.83 a barrel, ICE data showed.

Meanwhile, Asia's equity markets were mixed. Japan's Nikkei Stock Average rose 1.5% and South Korea's Kospi was little changed, while Singapore's FTSE Straits Times Index fell 0.3% and Malaysia's FTSE Bursa Malaysia KLCI was down 0.2%.

Stock markets in Hong Kong and China were closed for a public holiday.

 
 

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