Global bond yields hovered near their highest for decades on Wednesday, as fears over swelling sovereign debt pushed borrowing costs higher and rattled stock markets worldwide.
The yield on the U.S. long bond hit its highest in nearly 20 years on Tuesday, at 5.3371%, before steadying around 5.28% in Asia on Wednesday. The 10-year and 30-year bund yields hit their highest since 2011.
The French 30-year yield is up nearly 50 basis points since the end of June and Japan’s once-zero 10-year yield is closing in on 3% as inflation rises and investors fret policymakers are moving too slowly to counter it.
“Investors are no longer taking on faith that (government) spending gets brought under control. Indeed, they’re pricing the risk that it doesn’t,” said Nigel Green, CEO of financial advisory deVere Group.
Bond selling eased in steady Asian morning trade, but the inflation outlook remained troubling with Brent crude futures parked above $90 a barrel on no signs of progress toward a deal to open the Strait of Hormuz to oil tankers.
Later on Wednesday the U.S. Federal Reserve releases minutes from the July meeting where it left rates on hold, but Chair Kevin Warsh spooked markets by offering few clues about whether and how the central bank might respond to persistent inflation.
The U.S. is also set to sell $16 billion in 20-year debt.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7% and Japan’s Nikkei .N225 was down 2.6%, following tech-led losses on Wall Street overnight.
U.S. ESc1 and European STXEc1 stock futures slipped about 0.1%.
STOCKS WOBBLE, DOLLAR STEADIES
In China, shares in the world’s biggest humanoid-robot maker, soared 600% on debut, a listing that was more than 8,000 times oversubscribed by retail investors.
Asia’s broader technology and semiconductor stocks came under pressure, tracking overnight losses on Wall Street and from reports that Anthropic’s annual revenue run-rate topped $65 billion at the end of July, which was behind some market hopes.
The risk-averse mood has lent a little support to the dollar in currency markets, though moves were small.
The Canadian dollar rose a tad after U.S. President Donald Trump paused imposing a 50% tariff on Canadian goods for three days, saying the countries had reached a deal.
The eurohovered at $1.1576 and the yen traded at 159.44 per dollar, just in the shadow of 160 – a level investors see as a potential trigger for another round of official intervention.
British inflation data on Wednesday is due along with earnings at Lowe’s, Target and which will be closely watched after softer-than-expected U.S. retail sales data landed last week.
Home Depot beat estimates for second-quarter sales and profit on Tuesday, on strong demand from customers for repair and maintenance, though U.S. data showed homebuilding dived in July, hit hard by rising mortgage rates.
Debt demand is also being stretched by skyrocketing sales by AI Alphabet, Google’s parent, is the latest example, reportedly seeking about A$5 billion ($3.5 billion) through an Australian-dollar bond sale, Bloomberg News reported.
“Essentially the marginal investor in bonds, in long-end bonds, sovereign bonds, is becoming a bit more price sensitive at a time where there’s a lot of debt issuance occurring,” said ANZ senior rates strategist Jack Chambers.
(Reuters)
