SINGAPORE : Treasury yields hit new decade highs in Asia on Tuesday as traders grew wary of how long interest rates might need to stay elevated, with the higher risk-free rate putting a dampener on stocks even as beaten-down Chinese markets attempted a rebound.
Japan's Nikkei rose 0.5 per cent, helped by an overnight drop in the yen, which can be a boon for exporters' profits, and a positive lead from Wall Street where the S&P 500 rose 0.7 per cent.The selloff in bond markets is catching investors' eyes since it has no obvious trigger and has not come with major shifts in inflation expectations, meaning that"real" yields, which discount inflation expectations, have surged.
"Powell's comments on policy could continue to underpin, if not boost, real UST yields, especially if the notion of higher neutral rates are raised alongside reiteration on 'higher for longer'," Varathan added.Sovereign yields in Australia, Korea, New Zealand and Japan all rose on Tuesday, with 10-year Japanese yields hitting their highest since 2014 at 0.66 per cent.
China disappointed markets with smaller-than-expected interest rate cuts on Monday, though it has been resolute in defending its sliding currency.
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