Asian Bond Selloff Eases, Stocks Decline As Focus Shifts To UK Gilts, US Policy

TOKYO: The worldwide bond sell-off that has impacted stocks and strengthened the safe-haven U.S. dollar appeared to slow down on Thursday despite Japanese yields rising to new multi-year peaks. Stock selling persisted as most Asian share indexes dipped in early trading. The dollar remained steady, whereas oil prices decreased slightly. The key 10-year U.S. Treasury yield slipped to 4.6749 per cent in the most recent session, retreating from the overnight high of 4.73 per cent, the highest since April 2024. Yields on Japanese government bonds with equivalent maturity opened the day by increasing 1 basis point to reach the highest level since May 2011 at 1.185 per cent but remained unchanged by 0202 GMT. 

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Similar-dated Australian sovereign yields reached Wednesday’s peak since late November of 4.546 per cent during early trading but ultimately settled at 4.521 per cent, rising only 1 bp from the prior day’s close. The stability of global bond markets may depend on the developments with UK bonds later today, which have been the focal point of the selloff as analysts discuss a rising crisis of confidence in Britain's economic and fiscal situation, even though there is no clear reason for this week's 20-bps jump in 10-year gilt yields. "Certain individuals have highlighted the chance of a repeat of the Truss/Kwarteng mini budget incident that caused significant turmoil in UK gilts in September 2022," stated Chris Weston, head of research at Pepperstone. "Undoubtedly, there is justification for closely monitoring the UK bond market, and the latest developments are indeed worrisome," he stated. "Nevertheless, we can be somewhat reassured that the BoE (Bank of England) is better equipped this time." 

Dollar Holds Firm as Treasury Yields Rise; Asian Stocks Open Lower Amid Market Uncertainty

Sterling remained stable at Rs 106.22 ($1.23625) after its 0.9 per cent decline on Wednesday. The U.S. dollar index, which measures the currency against the euro, sterling, and four other key counterparts, remained stable at 109, not far from its highest point since November 2022, which was 109.54, achieved a week earlier. The dollar and U.S. Treasury yields have gained additional strength from recent indications of economic resilience and persistent inflation, leading to reduced market expectations for the level of Federal Reserve easing this year. The minutes from the Federal Reserve's December policy meeting, published on Wednesday, revealed officials' worries that President-elect Donald Trump's suggested tariffs and immigration measures could extend the battle against increasing prices. 

Bond selloff eases, stocks dip, dollar stable

Sales of Treasuries surged on Wednesday following a CNN report indicating that Trump is contemplating declaring a national economic emergency to legally justify a range of universal tariffs on both allies and adversaries. Markets currently anticipate just one 25-bps rate reduction in 2025 and estimate about a 60 per cent likelihood of an additional cut. All these factors have contributed to fragile global stock market sentiment, leading Asian equities to predominantly start in the red on Thursday. Japan's Nikkei (.N225) declined 0.7 per cent, and Australia's stock benchmark (.AXJO) dropped 0.6 per cent, while Taiwanese shares (.TWII) decreased by 0.2 per cent. Hong Kong's Hang Seng (.HSI) was relatively stable, whereas mainland Chinese blue chips (.CSI300) declined by 0.2 per cent. U.S. S&P 500 futures (.EScv1) indicated a 0.2 per cent decline, following the cash index (.SPX), which registered a 0.2 per cent increase overnight. 

US Markets Close Thursday for Carter Memorial; Oil and Gold Prices Decline

Stock markets will remain closed on Thursday in the United States, and Treasuries will have a reduced trading session in observance of the national day of mourning for former President Jimmy Carter. On Friday, the highly monitored monthly payroll report will offer potentially vital insights into the future of Fed policy. Oil prices fell for a second day, impacted by a rising dollar and significant increases in U.S. fuel stockpiles last week. Brent crude decreased by 39 cents to Rs 6510.49 ($75.77) per barrel. U.S. West Texas Intermediate crude declined by 39 cents to Rs 6266.46 ($72.93). Gold prices dipped by 0.1 per cent to approximately Rs 228386.92 ($2,658) per ounce, retreating from the overnight high of Rs 229426.61 ($2,670.10), the highest since December 13. The dominant cryptocurrency, bitcoin, remained stable at approximately Rs 8159805.90 ($94,965) after experiencing a 7 per cent drop over the past two days. 

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