Asian shares hold steady as bond selloff pushes yields high
- Asian shares held steady on September 25, as a relentless global bond selloff pushed longer-dated U.S.
- Risk assets face a severe squeeze as inflation worries and fiscal strains drive investors to demand higher returns on long-dated debt.
- "The world's bond markets are screaming, and ignoring it could prove very expensive," said Nigel Green, CEO of deVere Group, a financial advisory firm.
Asian shares held steady on September 25, as a relentless global bond selloff pushed longer-dated U.S. yields to two-decade highs and increased borrowing costs worldwide. The broader economic pressure is testing lofty equity valuations while crude oil prices hovering near $105 a barrel renew inflation fears, keeping the U.S. dollar on track for a 1% weekly gain against major peers.
Bond Yields Surge to Multi-Year Highs
Risk assets face a severe squeeze as inflation worries and fiscal strains drive investors to demand higher returns on long-dated debt. According to Reuters reporting, the benchmark 10-year Treasury yield rose 1 basis point to 5.1915%, following a two-day surge of 20 basis points to reach a 19-year peak of 5.2251%. That marked the largest two-day gain since April last year, when U.S. tariffs initially spooked markets. Thirty-year U.S. bond yields climbed 2 basis points to 5.4805%, hitting 5.5016% earlier in the week, which represents the highest level since 2004. This spike pushed U.S. mortgage rates to 7%, directly hamstringing the domestic housing market. International debt felt similar pressure, with Japan’s 10-year government bond yields rising 4 basis points to 3.115%, the highest since 1996, and Australia’s 10-year yields increasing 4 basis points to 5.408%.
“The world’s bond markets are screaming, and ignoring it could prove very expensive,” said Nigel Green, CEO of deVere Group, a financial advisory firm. “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.”
Nigel Green, CEO of deVere Group
Global Central Banks Shift to Hawkish Stance
Short-term debt curves offered no relief as Fed funds futures began pricing in a 71% probability of another interest rate hike next month, up from roughly 53% earlier in the week. Markets are currently pricing in more than 90 basis points of total tightening for this cycle. U.S. 2-year yields held steady at 4.9035% after jumping 16 basis points over the week. The Federal Reserve’s recent pivot back to rate hikes is rippling across international borders. Norway’s Norges Bank raised rates, Sweden’s Riksbank signaled a likely hike by the year end, and Mexico’s Banxico held rates steady while abandoning its previous guidance for a prolonged pause. This shifting global monetary policy keeps the U.S. dollar firm at 101.25 against its major peers.
Regional Equities and Commodity Markets
Equity performance across Asia remained mixed on September 25, with many regional exchanges closed for holidays, including mainland China, Taiwan, and South Korea. Japan’s Nikkei index rose 1%, while Australia’s resources-heavy shares fell 0.6% and Hong Kong’s Hang Seng index dropped 1%. MSCI’s broadest index of Asia-Pacific shares outside Japan remained flat. In energy markets, Brent crude eased 0.8% to $105.75 a barrel following a 3% overnight jump triggered by a Houthi missile attack on Saudi Arabia that reignited supply disruption concerns. Traders continue to monitor diplomatic efforts as the United States and Iran explore a phased path to potentially reopen the Strait of Hormuz. Meanwhile, high-level political talks unfolded in Washington between Chinese President Xi Jinping and U.S. President Donald Trump, though public reports indicated few immediate breakthroughs on trade, artificial intelligence, Taiwan, or the conflict involving Iran.
